FRI is a passive, market-cap-weighted index fund that owns REITs in the S&P U.S. REIT Index in roughly the same weights as the benchmark. Its quarterly distribution is the pass-through of dividends paid by underlying property owners, net of a small expense drag. There are no options overlays, leverage, or return-of-capital tricks. If underlying REITs raise dividends, FRI's distribution rises. If they cut, FRI's distribution falls. The safety analysis hinges on the largest holdings rather than fund mechanics.
It has been trading sideways since 2023 due to a variety of issues. Namely, interest rates have been too high, and this hasn't given REITs the room to recover. Remember, REITs are businesses with high debt loads and high interest rates, which puts disproportionate pressure on them. However, these REITs have been able to avert the worst. They've drawn lessons from 2008, and most of them have paid growing dividends in the past couple of years and have even expanded them.
The Columbia Research Enhanced Real Estate ETF (NYSE:CRED) launched in April 2023 at exactly the wrong moment. Real estate had just entered a brutal bear market triggered by the Federal Reserve's fastest rate hiking cycle in four decades. Since inception, CRED has delivered a negative 1.6% return while managing just $3.1 million in assets, creating liquidity concerns for anyone building a meaningful position. But the thesis for buying now isn't about 2023 or 2024-it's about what the Fed does next.
The Vanguard Real Estate Index Fund ETF Shares (NYSEARCA:VNQ) has struggled badly. Over the past five years, the fund gained just 2.6% while the S&P 500 surged 85%, a gap wide enough to make investors question whether real estate deserves a place in their portfolios. The culprit: the Federal Reserve's aggressive rate hiking campaign beginning in March 2022 sent REITs into a prolonged downturn.
Invesco High Dividend Low Volatility ETF ( NYSEARCA:SPHD) generates its 4.71% yield - roughly three times the S&P 500's current dividend - by holding a concentrated portfolio of 50 U.S. stocks selected for high dividend yields and low volatility. With $3.1 billion in assets and a reasonable 0.30% expense ratio, SPHD takes an equal-weight approach to defensive sectors including utilities, REITs, healthcare, and consumer staples. The fund's income comes directly from dividends paid by underlying companies,
The bigger question isn't whether you can earn a 5% yield, you can, but it's more of a question as to how to do so safely. This doesn't mean safe, like keeping your cash under a mattress safe, since there is no interest earned. On the other hand, you have to think about what your risk level truly is, and while you don't want to chase too much risk, you can't avoid it at all.
The Goldman Sachs Conviction List is a curated list of stocks that the firm's research team believes have a high likelihood of outperforming the market. It is a tool for investors to identify stocks with strong growth potential, and it is frequently updated to reflect changes in market conditions and company performance. The list aims to pinpoint stocks in which Goldman Sachs analysts have the "highest level of conviction" for outperformance.
Making it even more attractive is the recovery in commercial real estate. According to analysts at Deloitte, the CRE market is showing signs of recovery in 2025, with some predicting a generational opportunity, as noted in Deloitte's 2025 Commercial Real Estate Outlook. Some of the ETF's top holdings include Welltower, Prologis, American Tower Corp., Equinix, Digital Realty Trust, and Simon Property Group.
While speaking this month at a summit hosted by the "All-In" podcast, Khosrowshahi fielded a question about how Uber would handle ownership of the self-driving cars that it plans to add to its operations in the coming years. All-In posted a video of the conversation on Wednesday. "You're going to have financial owners that own big fleets of cars that are on our network," Khosrowshahi said. "All of these cars are going to be financeable," he said.
"Because of the strong dividend income REITs provide, they are an important investment both for retirement savers and for retirees who require a continuing income stream to meet their living expenses. REITs' dividends are substantial because they are required to distribute at least 90% of their taxable income to their shareholders annually. Their dividends are fueled by the stable stream of contractual rents paid by the tenants of their properties," says REIT.com.
