VNQI - Cheap REITs Stay Cheap

• Earlier this year, we published a report titled "Cheap REITs Stay Cheap" that analyzed the "factors" that exhibited persistent outperformance in the REIT sector over the past several decades.
• Key takeaways from this report included the observation that higher-yielding, higher-leveraged, and "inexpensive" REITs tended to produce inferior total returns over most measurement periods.
• These "factors" were on full display at extreme levels in 2020 amid the coronavirus pandemic. We revisit and analyze the performance trends within the REIT sector.
• REITs in the highest quadrant of dividend yields entering 2020 plunged more than 30% and saw the vast majority of dividend cuts. REITs in the lowest dividend yield quadrant produced positive total returns.
• Despite the pullback in 2020, REITs have been one of the best-performing asset classes since the start of 2010. Investors willing to "pay up" for quality REITs should continue to be rewarded while "yield chasers" will likely be punished.

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