A PIMCO Play on REITs

03/03/2020 5:00 am EST

Focus: REITS

Ned Piplovic

Assistant Editor, Eagle Financial Publications

The PIMCO Real Estate Real Return Strategy Fund (PETCX) seeks to capture the performance potential through derivative exposure to the Dow Jones U.S. Select Real Estate Investment Trust (REIT) Index, observes Ned Piplovic, editor of DividendInvestor.

This exposure is collateralized with a portfolio of Treasury Inflation-Protected Securities (TIPS) that provide additional return and inflation hedging potential. As of January 31, 2020, the fund’s 104 individual holdings combined for $1.17 billion in total assets.

Aside from 14% of assets invested in diversified real estate opportunities, the fund has allocated nearly 23% of its assets into residential apartments. An additional 12.4% of the fund’s assets comprises warehousing and industrial facilities.

Additionally, office real estate properties account for more than 10% of net assets. These top four categories combine for nearly 60% of the fund’s total assets.

All the remaining investment areas — Health Care, Storage, Manufactured Homes, Regional Malls, Hotels and Shopping Centers — contribute less than 10% each.

The fund has hiked its quarterly distributions more than 35-fold over the past four years, which corresponds to an average growth rate of 144% per year. The fund’s current $0.67 annualized dividend distribution is equivalent to a 9.32% forward dividend yield.

Even after pullbacks driven by the overall market decline, the share price is still 5.75% higher than it was one year earlier. This asset appreciation and dividend distributions have combined for a total return of nearly 14.5%. The total return over the past three years was nearly 20% and almost 28% over the last five years.

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