VNQ Vs. VNQI: Why International Real Estate Looks More Appealing Right Now
U.S. REITs have outperformed global peers significantly, driven by valuation multiple expansion, stronger dollar, and higher real GDP growth. U.S. REITs benefited from stronger real GDP growth, supported by population increases and productivity gains, while international REITs faced challenges like weaker growth and demographic issues in certain regions. VNQI trades at significantly lower valuation multiples than VNQ, despite a comparable return on equity, suggesting potential undervaluation of international real estate.
VNQ: There Is A Problem Called Opportunity Cost
Over the past 15 years, higher returns have come from multiples and earnings strategies, not dividends. REITs underperform in falling interest rate cycles, raising concerns about VNQ's opportunity cost. VNQ trades at P/B with no margin of safety, questioning its investment value.
VNQ: This Chart Shows It's Not Too Late To Buy REITs
The REIT sector has recently outperformed the SP500 by a large margin. However, VNQ's most recent dividend payouts suggest its price advancements have yet to catch up with earnings growth. VNQ's latest quarterly dividend distribution made in October translates into a 50% YOY growth when returned capital is excluded and 27% growth on a TTM basis.
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VNQ: Improved Strength Following Interest Rate Cuts
Vanguard Real Estate Index ETF (VNQ) is one of the best ways to gain instant diverse exposure to the real estate sector. Even though the dividend yield of 3.6% is a bit unexciting compared to its underlying holdings, it remains stable and supported by holdings. However, the dividend has lacked meaningful growth. The Fed has cut interest rates by 0.5%. This should improve the strength of underlying holdings.
The Zacks Analyst Blog VNQ, ITB, XLY, IWM and GLD
VNQ, ITB, XLY, IWM and GLD are included in this Analyst Blog.
VNQ: Active Approach Prevails, But Passive Investors May Benefit
VNQ offers broad real estate market exposure with sector diversification, modest returns, and a reasonable expense ratio, which may be attractive for passive investors. Despite VNQ's benefits, cherry-picking REITs can yield higher returns, as seen with Agree Realty, EPR Properties, and VICI Properties. Rising interest rates impacted REITs, but expected monetary easing should boost VNQ's performance, with potential for double-digit total returns.
Prediction: This Will Be the Best-Performing Vanguard ETF Through 2025
I wouldn't be surprised to see the Vanguard Real Estate ETF outperform all other Vanguard ETFs between now and the end of 2025. Real estate is perhaps the most rate-sensitive area of the stock market and has dramatically underperformed recently.
Prediction: These 3 Vanguard ETFs Will Double Investors' Money in 5 Years
Three groups of stocks that have dramatically underperformed the market are small-cap stocks, value stocks, and real estate investment trusts. All three could get a major tailwind if the Federal Reserve starts lowering interest rates as expected.
VNQ: Don't Fear A Recession, It's A Great Time To Accumulate This ETF
The real estate stocks segment has fallen from all-time highs, but may offer long-term value. The lowering of interest rates signals the end of this economic cycle, and historically, real estate tends to perform well in the stock market, even though it may seem illogical. Consider starting or continuing a Dollar-Cost Averaging plan in the real estate stock segment due to recession concerns.
VNQ: REITs Passed The Recent Test
VNQ is a large, diversified REIT ETF that can be used as a benchmark for REIT performance under different macro scenarios. VNQ performed well during the recent growth scare. It should also perform well under a stable economy with falling inflation.
VNQ: Clarifying The Confusion
Commonly quoted dividend yield understates the attractiveness of VNQ's current valuation. The inclusion of returned capital in the calculation of VNQ's dividend yield can be misleading. VNQ is currently trading at the most attractive levels in a decade when capital return is excluded from the dividend yield calculation.
