Summary

• U.S. equity markets were mixed Thursday as strong retail earnings reports from Macy's and Kohl's and solid employment data were offset by inflation anxieties and an uptick in COVID cases.
• Notching its 66th record-close of the year, the S&P 500 advanced 0.5% today while the Mid-Cap 400 slipped 0.1% and the Small-Cap 600 finished lower by 0.3%.
• Real estate equities were mixed with retail and residential REITs leading as the Equity REIT Index finished flat with 9-of-19 property sectors in positive territory while Mortgage REITs slipped 0.5%.
• Shopping center REIT Kite Realty was among the leaders after hiking its dividend for the fourth time yesterday afternoon, one of over 110 REITs that has boosted their payouts this year.
• NAREIT published its quarterly compilation of REIT earnings metrics today. REITs recorded their strongest quarter of same-store NOI growth on record in Q3 while external growth - both building and buying - has also kicked back into high gear.

Income Builder Daily Recap

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U.S. equity markets were mixed Thursday as strong retail earnings reports from Macy's and Kohl's and solid employment data were offset by anxieties over inflation and a recent uptick in COVID cases. Pushing their week-to-date gains to 0.5%, the S&P 500 advanced 0.5% today while the Mid-Cap 400 slipped 0.1% and the Small-Cap 600 finished lower by 0.3%. Real estate equities were also mixed with retail and residential REITs leading as the Equity REIT Index finished flat with 9-of-19 property sectors in positive territory while Mortgage REITs slipped 0.5%.

Seven of the eleven GICS equity sectors were lower on the day with the Communications (XLC) and Energy (XLE) sectors dragging on the downside while the 10-Year Treasury Yield slipped back below 1.60%. Technology (XLK) stocks were propelled by strong results from chipmaker Nvidia (NVDA), which boosted its full-year outlook while Apple (AAPL) gained on Bloomberg reports that it plans to accelerate the development of its electric car. Elsewhere, a strong day from residential REITs and home improvement retailers pushed the Hoya Capital Housing Index to fresh closing highs.

Equity REIT Daily Recap

As discussed today in the Income Builder chat room, with REIT earnings season now complete, we’ve begun to compile and update the quarterly metrics for the State of the REIT Nation Report. After fully recovering the declines from early in the pandemic in the second quarter of 2021, FFO is above the peak level prior to the pandemic. Dividends paid by equity REITs totaled $12.1 billion, and dividends paid by mREITs totaled $1.8 billion. The $13.8 billion overall dividends paid was 8.3% above the prior quarter and 18.6% above the third quarter of 2020. This represents the highest quarterly growth in dividends paid since prior to the start of the pandemic. The REIT average same-store NOI rose 7.3% from last year - the highest on record.

As anticipated, REITs have become active buyers given favorable valuations – and acquisitions have historically been a key component of FFO/share growth. REITs acquired $27.3B in assets in Q3 while selling $11.9B for net growth of $15.4B. On a trailing twelve-month basis, REITs have acquired $47.4B in net assets – the highest expansion in the asset base since Q3 2015.

REIT external growth comes in two forms – Buying and Building. REITs have become some of the most active builders in the country and expanded the pipeline in Q3 back to levels essentially in-line with the prior record set just before the pandemic in 4Q19 at $46.56B. Industrial REITs have seen their pipelines swell the most significantly – up more than 50% from last year. New development in retail remains essentially non-existent, down another 7% year-over-year. Residential has also seen limited supply growth despite the boom in home prices and rents.

Data Center: Yesterday, we published Data Center REITs: Merger Mania. The Data Center REIT sector has been substantially and rapidly transformed as the three largest data center portfolio acquisitions in history have been announced in just the past several months. Digital Realty (DLR) and Equinix (EQIX) have been surprisingly quiet on the M&A front - but EQIX did announce today a partnership with DISH (DISH) to provide digital infrastructure services in support of its 5G network buildout as the lines between data center and cell tower have become quite a bit more "blurry" over the last few quarters - propelled by 5G network deployments, underscored by American Tower's (AMT) acquisition of CoreSite (COR) earlier this week.

Mortgage REIT Daily Recap

Per the REIT Rankings Tracker available to Income Builder subscribers, residential mREITs slipped 0.5% today while commercial mREITs ended lower by 0.6%. On a quiet day of mREIT newsflow, Franklin BSP Realty (FBRT) led to the upside while Western Asset Mortgage (WMC) was a laggard. The average residential mortgage REIT now pays a dividend yield of 9.22% while the average commercial mortgage REIT pays a dividend yield of 6.23%.

REIT Preferreds & Capital Raising

Per the REIT Preferred Tracker available to Income Builder subscribers, REIT Preferreds declined 0.07% today, on average, but remain higher by 8.80% on a price-return basis with total returns of roughly 14%. New York Mortgage Trust (NYMT) announced the launch of a new preferred issue - a 7.000% Series G Cumulative Redeemable Preferred - for gross proceeds of $75,000,000 which is expected to close on November 24, 2021 and will trade on NASDAQ under symbol NYMTZ. The company also announced that it intends to use the proceeds to redeem its 7.75% Series B Cumulative Redeemable Preferred (NYMT.PB).

Income Builder Trending Reports

Below we highlight several of the most-read reports over the last 24 hours published by the Income Builder contributor team.

• VWOB: Combat Inflation With High Dividends From Emerging Markets (ETF Monkey)
• Owl Rock Capital: 8.6% Yield, Why Wait When You Can Get Paid Now (Gen Alpha)
• SPHD: Why You'll Want To Sell Before February (Sunday Investor)
• Put Writing: Analysis On How Contract Length Can Affect Premiums And Returns (Retired Investor)
• Data Center REITs: Merger Madness (Hoya Capital)

Economic Data This Week

We'll publish a full analysis and commentary of this week's developments in the real estate industry, as well as an analysis of the busy week of economic data in our Real Estate Weekly Outlook report published this weekend.

We're excited to announce the launch of our new investment research service here on Seeking Alpha - Hoya Capital Income Builder. We've put together a great team of contributors from across the REIT, dividend, and ETF industry, so whether your focus is High Yield or Dividend Growth, we’ve got you covered with high-quality, actionable investment research and a comprehensive suite of tools and models to help build sustainable portfolio income targeting premium dividend yields of up to 10%. And of course, subscribers receive complete access to our investment research - including reports that are never published elsewhere - from Hoya Capital and our team of contributors.

Disclosure: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings are available on our website.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.