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Why 2022 may be good for REITs?

Real estate investment trusts are companies that own property or mortgages, and qualify for certain tax benefits by distributing a majority of their earnings to shareholders in the form of dividends. In 2021, the FTSE Nareit All REITs index made approximately 41.3% vs 28.7% (including dividends) for the S&P 500 index. An annual return of 10% doesn’t sound very sexy, but that is what Richard Hill (who manages REITs coverage for Morgan Stanley) predicts for 2022. One of the reasons being the Federal Reserve’s indication of an increased willingness to raise interest rates over the next couple of years. Morgan Stanley’s outlook for the S&P 500 ending 2022 at 4400, is another reason (because if that proves correct, and Mr. Hill’s estimate of a 10% return for REITs is also on-target, that means another year of remarkable outperformance). Source: Barron’s Streetwise.

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