Maximizing REIT Returns with a Screener
A REIT screener narrows the list of real estate investment trusts (REITs) to the ones that match your criteria, typically property type (apartments, offices, industrial, data centers, and so on), dividend yield, dividend coverage from funds from operations (FFO or AFFO), leverage, and valuation. Screening does not guarantee higher returns; it makes the research manageable and keeps the comparison consistent. REITs must distribute most of their taxable income, so their yields are usually higher than the market's, and their payout ratios on net income often look high because depreciation is a large non-cash charge. This article is educational and not investment advice.
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What is REIT Screening?
REIT screening is filtering REITs on criteria suited to real estate. It works like stock screening, but the key metrics differ: FFO and AFFO replace earnings, and occupancy, property type, and leverage matter more than for most companies.
Why Should You Use a Screener?
A screener applies the same criteria to every REIT at once. They provide investors with data and analysis to help them evaluate an investment’s potential and make an informed decision. The benefits of using a REIT screener include narrowing the search criteria and reducing the number of investments to consider. Additionally, investors can use screeners to identify property investments that best meet their criteria for return on investment, risk, capital appreciation, and other criteria.
How to Maximize REIT Returns With a Screener
After screening, build the portfolio deliberately. The strategy needs to be tailored to individual investors’ needs and risk tolerance. A good starting point is to analyze the properties and assess their potential for capital appreciation, risk management, and income potential. Investors should also consider diversification benefits, such as the return potential of investing in diverse types of properties in different local and regional markets.
MarketXLS: Streamlining the Investment Process
With MarketXLS you can screen stocks on the web with the MarketXLS screener, or build a REIT screen in Excel with one REIT per row and formulas such as =DividendYield("O"), =MarketCapitalization("O"), and =Sector("O"). Note that DividendYield returns a decimal (0.055 means 5.5%).
REITs can diversify a portfolio, but they are sensitive to interest rates and property-type cycles. A screener plus a deliberate portfolio construction plan keeps the process consistent.
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