Driven by investor demand for large-cap technology growth stocks, the S&P 500 delivered an exceptionally strong 21.83 percent total return in 2017, while the FTSE Nareit All REITs Index underperformed the broader market with its 9.72 percent total return. An analysis by Nareit Senior Vice President of Research and Industry Information Brad Case, however, argues that investors’ focus on large-cap tech stocks has left REITs overlooked and undervalued, and poised for outperformance in 2018.
Case’s analysis, included in a 2018 market outlook from Nareit, uses a valuation method based on comparing REIT dividend yields to the yields on other investments that, like REITs, provide strong and steady income streams, such as Baa-rated corporate bonds.
A surprisingly reliable predictor
“For nearly 30 years, there has been a remarkably consistent relationship—with a correlation of more than +90 percent—between equity REIT dividend yields and th
