As interest rates have been kept in the proverbial basement, investors looking for income have been drawn to all matters of high-yielding and exotic asset classes. Everything from master limited partnerships (MLPs) to preferred stock have gotten second or sometimes third looks from income-starved portfolios. One of the biggest recipients of investors’ cash has been real estate investment trusts (REITs).
The owners of commercial property – from apartment buildings to office parks – have become immensely popular with investors over the last few years, the reason being their tax status and the mega dividends they kick out. As a result, REITs have been one of the best-performing asset classes since the Great Recession and the era of low interest rates.
The problem is, we aren’t in the era of low interest rates anymore. As the Federal Reserve has begun to tinker with rates and finally move the needle upwards, REITs have tanked. Investors have simply sold off the higher-yielding sector.
But for longer-term and savvy investors, this could be the moment you’ve been waiting for to load up on the asset class.