KBWY Stock: The Best High-Yield Investment in Real Estate?
Lock in a 6.88% Yield That’s Paid Monthly
Today’s chart highlights a high-yield investment in real estate that most people likely haven’t considered.
When it comes to real estate investing, there are basically two options. The first is being a landlord; you buy properties and rent them out. Alternatively, you can invest in real estate investment trusts (REITs), which allow investors to earn a rental income without all the hassles of being a landlord.
Stock market investors like real estate investment trusts. The thing is, with more than 200 REITs trading on U.S. stock exchanges, which ones should income investors own?
Well, to narrow down the choice, investors need to look into each REIT’s portfolio. Some REITs own residential properties, while others specializes in retail space. There are also REITs focusing on medical facilities, industrial warehouses, and even data centers.
Just like buying individual stocks, REIT investing can involve a significant amount of work. Other than differences in the types of properties, REITs can also differ in their financial profiles. For instance, two companies both focusing on owning apartment buildings but have different debt structures can have very different financial performances in a rising interest rate environment.
Sounds complicated? Well, there is also a very simple way to perform REIT investing. And that involves using something called an exchange-traded fund, or ETF.
A real estate ETF owns a portfolio of REITs. For investors who want to boost the yield of their income portfolios, one REIT ETF stands out: PowerShares KBW Premium Yield Equity REIT Portfolio (NASDAQ:KBWY).
KBWY ETF is designed to track the performance of the KBW NASDAQ Premium Yield Equity REIT Index. As the name suggests, the index consist of equity REITs, which are those that invest in physical properties rather than mortgage assets.
The number-one reason to consider KBWY ETF is its generous payout. With a monthly distribution rate of around $0.22 per share, the fund offers investors an annual yield of 6.88%.
To put it in perspective, the two most well-known real estate ETFs, Vanguard REIT ETF (NYSEARCA: VNQ) and iShares U.S. Real Estate ETF (NYSEARCA: IYR), are yielding 4.69% and 3.98%, respectively.
High Dividend Yield
Source: Google Finance
KBWY’s portfolio companies are dividend yield weighted, which partially explains why it can offer such an impressive payout. The portfolio usually includes between 24 to 50 small- and mid-cap equity REITs in the U.S. Right now, the fund holds 29 real estate stocks. Its three largest holdings are CBL & Associates Properties Inc (NYSE:CBL), Washington Prime Group Inc (NYSE:WPG), and New Senior Investment Group Inc (NYSE:SNR). (Source: “KBWY – PowerShares KBW Premium Yield Equity REIT Portfolio,” Invesco Ltd, last accessed October 19, 2017.)
Just like the index, KBWY ETF gets rebalanced and reconstituted on a quarterly basis. According to its current schedule, the fund’s holdings will be adjusted on the third Friday of March, June, September, and December.
Final Thoughts on This High-Yield Stock
At the end of the day, keep in mind that like all funds, KBWY ETF charges a management fee, which is currently at an annual rate of 0.35%. However, due to its diversified portfolio, a high dividend yield, and the automation of portfolio management, the fund deserves the attention of income investors looking to get into real estate.