While real estate investment trusts offer relatively juicy returns, the market may be getting overheated, and investors should think twice about which REITs they invest in, a columnist in the Wall Street Journal argued.
REITs have had a great year — the MSCI U.S. REIT index has gained 30 percent since last October, the Journal said — likely due to the fact that yields on other investments are low, with REITs yielding about the same as corporate bonds. And while REITs offer the same yield — 3.4 percent — they offer higher dividends in the long term, as rents will likely rise, the Journal said.
Nonetheless, as investors have gravitated towards residential REITs, the market has gotten frothy, the Journal said. A more prudent investment would be investing in an REIT that owns industrial properties — a less sexy, but more predictable asset class. [WSJ] – Guelda Voien