Core Viewpoint - Real estate investment trusts (REITs) are expected to attract more income investors in 2024 as declining Treasury yields may draw investors back to high-yielding REITs and dividend stocks [1][4]. REIT Performance and Market Conditions - Many REITs faced challenges in 2022 and 2023 due to rising interest rates, which increased property acquisition costs and created macroeconomic headwinds for tenants [2]. - The Federal Reserve is anticipated to cut benchmark rates five times in 2024 and 2025, stabilizing many REITs, although Treasury yields may not decline as quickly due to concerns over inflation and government debt [3]. - REITs have been trading sideways recently, but a potential rally is expected as Treasury yields decline [4]. Investment Opportunities in REIT ETFs - Investors looking to capitalize on the anticipated trend without purchasing individual REITs may consider diversified exchange-traded funds (ETFs) [5]. Vanguard Real Estate Index Fund ETF (VNQ) - VNQ is the largest REIT ETF, tracking 153 stocks across 17 sectors, with significant investments in healthcare (15%), retail (13.5%), and industrial REITs (11.3%) [6]. - VNQ has a market cap of $89.81, a 52-week range of $76.92 to $99.20, and an effective yield of 3.62% [8][9]. - It has a low expense ratio of 0.13% and a minimum investment of $1, making it accessible for most investors [9]. Schwab U.S. REIT ETF (SCHH) - SCHH tracks the Dow Jones Equity All REIT Capped Index, holding 124 stocks, with top holdings in Welltower (9.9%), Prologis (8.5%), and American Tower (4.9%) [10]. - It offers a 30-day SEC yield of 3.6% and has a low expense ratio of 0.07% with no minimum investment requirement [10][12]. Real Estate Select Sector SPDR Fund (XLRE) - XLRE focuses on data center, logistics, and communications REITs, which are expected to benefit from trends in cloud computing, AI, and e-commerce [13][15]. - It holds 31 stocks, with top holdings in Welltower (11.1%), Prologis (9.6%), and American Tower (7.1%) [15]. - XLRE has a 30-day SEC yield of 3.48%, a low expense ratio of 0.08%, and no minimum investment threshold, offering a blend of income and growth potential [16].

Core Insights - The Invesco KBW Premium Yield Equity REIT ETF (KBWY) targets income-focused investors with a high trailing 12-month yield of 9.99% and an SEC 30-Day Yield of 8.85% [1][20] - The ETF has a total expense ratio of 0.35% and manages approximately $241 million in assets [1] - KBWY has underperformed compared to its benchmark, the Vanguard Real Estate Index Fund ETF (VNQ), with a total return of 69.19% since inception, significantly lower than VNQ's 198.98% [10][11] Investment Strategy - KBWY tracks a modified-dividend yield-weighted index of small- and mid-cap domestic equity REITs that have competitive dividend yields [2] - The index is reconstituted annually and rebalanced quarterly, with holdings capped at 8% [2] Portfolio Composition - The fund is primarily invested in U.S. companies, with about 75% of its asset value in micro-cap stocks [4] - The portfolio is concentrated, with the top 10 holdings representing 47.5% of the asset value [7] - Key sectors include diversified REITs, healthcare REITs, and office REITs, while retail and residential REITs are downplayed [4] Performance Metrics - KBWY has lagged behind VNQ by 4 percentage points in annualized return since inception [10] - The fund has a higher maximum drawdown of -57.69% compared to VNQ's -42.40% [11] - Over the last three years, KBWY's total return was 4.66%, significantly lower than VNQ's 32.06% [12] Distribution History - Distribution trends have been irregular, with the annual sum of distributions for 2024 projected at $1.56 per share, nearly the same as in 2014 [13] - The fund has experienced a decline in dividend growth, with a 5-year CAGR of -7.82% [18] Competitive Landscape - KBWY stands out for its high yield compared to other U.S. equity REIT ETFs, but it has the worst total return since March 2019 [19] - The fund's expense ratio is competitive at 0.35%, similar to other ETFs in the space [18]