REITs Overvalued?
REITs are great sources of dividend income. In the last few years, the housing boom has made such investments even more attractive. Some question whether a bubble is ready to burst in REIT stocks:
But a growing number of analysts are warning that REIT shares are overvalued. The average dividend yield on REIT stocks is just under 5 percent, more than double the yield of stocks in the Standard & Poor’s 500 index. But REITs are more vulnerable to any abrupt uptick in interest rates, analysts agree. As a result, investors should temper their expectations. The last time REIT fund inflows reached current levels was in early 1997, followed by two years of poor performance.