Real estate investment trusts (REITs) recovered from their sharp decline in the early stages of the pandemic recession, observes Bob Carlson, dividend investing expert and editor of Retirement Watch.
Cohen & Steers Realty Shares (CSRSX) remains one of the top-performing REIT funds. After developing an outlook for the economy, the fund managers identify the REIT sectors most likely to benefit from that outlook.
Then, the fund managers buy the REITs in the sector that own quality properties, have quality management and sell at reasonable prices.
Late in 2020, CSRSX revamped its portfolio. Its management expects sectors that will remain challenged in the post-pandemic economy are office buildings, retail facilities and hotels. The fund will take only limited positions in those sectors in quality REITs selling at attractive prices.
The fund seeks to own REITs in sectors that will benefit from long-term changes in the economy, such as data centers, cell towers and single-family rental homes.
It also currently pursues positions in sectors likely to benefit as vaccines are widely administered, including apartments, health care, gaming and student housing. Other sectors will recover as economic growth increases, including self-storage, home builders and timber.
The fund is down 1.02% in the last four weeks. But it is up 2.43% in the last three months, 2.26% for the year to date and 0.18% over the last 12 months.
Top positions in the fund recently were American Tower (AMT), Simon Property Group (SPG), Public Storage (PSA), Duke Realty (DRE) and Crown Castle International (CCI). It recently owned 38 REITs and had 48% of the fund in its 10 largest positions.
Low interest rates mean very low income for retirement and income investors. Low interest rates also mean there’s a high risk that rates could rise and reduce the value of bonds, as happened recently.
Meanwhile, our Retirement Paycheck portfolio has been delivering above-average yields and capital gains while maintaining a margin of safety. The portfolio owns a combination of REITs and preferred securities through Cohen & Steers REITs & Preferred Income (RNP).
It is not a buy-and-hold portfolio. We buy when the investments are unpopular and sell when there isn’t a big enough margin of safety.
This closed-end fund, which uses about 24% leverage, is about evenly split between REITs and preferred securities. The fund is down 1.38% in the last four weeks. But it is up 4.34% in the last three months, 0.62% for the year to date and 7.21% over 12 months.
The distribution yield is 6.55%. None of the distributions in the last three years have been return of capital. The recent discount to net asset value was 3.40%, which is lower than the six-month average discount of 6.11%.