Income Investors See Value in Various REIT Securities

Dividends continue to be a major draw for investors when evaluating REITs, according to Mark Snyderman, fund manager with Fidelity Investments. Speaking with REIT.com during last month's REITWeek 2012: NAREIT's Investor Forum, Snyderman, who manages the Fidelity Real Estate Income Fund, said his fund targets REIT securities for the yield they provide.

Snyderman invests in a mixture of types of REIT securities (common, preferred and bonds, as well as commercial mortgage-backed securities) for the Fidelity Real Estate Income Fund. He said the challenge he faces managing the fund it what allocation to have among the various investment choices.

"With low interest rates, one of the big issues is how low yields are coming on preferred stocks, for example," Snyderman said.

Snyderman added that the biggest long-term issue that has to be weighed will continue to be interest rates. Depending on what happens with rates, Snyderman said it will have an impact on the security types he chooses.

Looking specifically at the second half of 2012, Snyderman said he is closely monitoring REIT price-to-earnings (P/Es) ratios to the broader market.

"When you compare REIT stocks to the broader market they can look quite expensive," Snyderman said. "But when you compare REITs to current interest rates they look quite cheap. So this interplay of where interest rates are going and where P/Es might go relative to the broader market are quite significant."