REM: Robust Total Return Outlook
The iShares Mortgage Real Estate Capped ETF invests exclusively in mREITs, exhibiting a 69.17% allocation to its top ten positions. REM's ten largest positions are projected to deliver capital gains of about 4.5% over the next twelve months. The ETF's ~9.3% current yield remains its main appeal, although weakness in commercial mREITs has delayed an anticipated return to dividend growth.
REM: Solid Choice Unless A Recession Hits
REM is one of those ETFs I am always tracking, even if I don't currently own it (I don't). The mortgage REIT industry is often a steady source of above-average dividend yield, enough to not be too concerned about earning much more than the dividend provides. However, REM has a history of performing very poorly in recessions, which gives me pause, since we might be heading into one soon.
REM: Not Worth The Expense
The iShares Mortgage Real Estate ETF is heavily skewed towards a few large-cap mortgage REITs, limiting diversification benefits. REM's 0.48% expense ratio is high and unnecessary, as similar exposure can be achieved by holding key constituent REITs directly. Employment outlook is crucial for REM's performance; current economic signals suggest stability, but the expense ratio remains unjustifiable.
S&P 500's Dividend Growth Needs To Pick Up To Beat REM's 9.35% Yield
The iShares Mortgage Real Estate Capped ETF invests in 33 US mREITs but holds a significant 65% concentration in its top ten holdings. Muted year-to-date performance has resulted in REM trading at a significantly higher dividend yield relative to the SPY. REM's dividend is well-covered considering the valuations of its top ten holdings.
REM: A Likely Beneficiary From The Fed Pivot
The iShares Mortgage Real Estate Capped ETF has substantially underperformed the SPDR S&P 500 ETF in 2024. Top ten holdings account for about 65.47% of REM's net assets. The ETF offers a well-covered ~9% yield even after the 0.48% expense ratio.
