South African REITs are defying the new normal
When it comes to yields, we all obviously seek more. Especially now, with the majority of the developed world (EFA) (VEA) at low or dismal yields, yield-thirsty investors are increasingly looking for high-dividend options. While policy makers may have adjusted to the low growth new normal and the IMF may be warning of a global productivity slowdown; investors are on the hunt for growth. Similarly, when it comes to investment in real estate equities, a higher yielding product is always sure to win attention, and South African REITs are doing exactly this.
In March, we highlighted the importance of dividends in our article, Five Emerging Market ADRs Offering Big Dividends. Interestingly, dividends have accounted for over 30% of total S&P 500 returns during the past decade. In May, we listed and analyzed 5 of the Highest Yielding Emerging Market Dividend Funds.
South African REITs offer the highest dividend yields, globally
Now, we looked across the real estate industry to find the countries with the highest yields on offer globally. Though our analysis did reveal that US real estate scores over global real estate (ex-US) on average dividend yield; there are regions where real estate dividend yields are far above the US on average. The US real estate-tracking Vanguard REIT ETF (VNQ) had a 4.24%, as compared to the Vanguard Global ex-US Real Estate ETF (VNQI) which had a dividend yield of 3.53%, according to data derived from Bloomberg on June 5. Beyond the US, we see high-dividend opportunities in real estate in emerging markets (EEM) (VWO) such as South Africa (EZA), Russia (RSX), Taiwan (EWT), Qatar (QAT), and Mexico (EWW).
A whopping 6.98% dividend yield
South African real estate is of particular interest here. With a whopping dividend yield of 6.98%, the country’s real estate offers the highest dividend yield, globally. What makes it even more attractive is that it is currently trading at a 70% discount to US real estate.