Here’s why our REIT’s have been slammed today

Today has been a tough day for holders of ASX-listed real estate investment trusts (REITs).

Here are four big REITs and property groups being smashed today:

What’s happened?

REITs are favoured by investors in times of low interest rates and volatility as they offer higher dividend yields (than returns on offer from things like term deposits) and usually exhibit more stable share prices due to the relatively straightforward way their assets are valued and income is generated.

What’s happening now is that interest rates around the world are poised to start increasing in 2017, making investments in REITs less attractive. This is because the difference between the dividend yield from the shares and risk-free returns from government bonds/term deposits should narrow.

If investors feel that they can accept a slightly lower return while removing almost all risk, then they’ll likely move their investment funds from the REIT to the lower-risk investment.

What should you do?

Like always, you should search for quality companies, with sustainable competitive advantages over their peers, and that have a reasonable chance of earning more money next year than they did this year. REITs can fit that bill, but have been quite expensive until recently. Other companies offering big dividends with solid business models may be better long-term options.


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Motley Fool contributor Andrew Mudie has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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