Those at the forefront of the recent real estate investment trust run are likely reaping the rewards of impressive dividends.
Investors that got in last year or even in the past few months were probably able to take advantage of some relatively cheap yet promising REIT options. In fact, REITs have actually outpaced the S&P 500 for the better part of the year, and there is no reason to suspect that they can't finish strong, so long as the housing market continues on its trajectory.
Not surprisingly, the recent success of REITs has caught the attention of investors around the world. As a result, REITs have become the beneficiaries of increased exposure.
Due in large part to their attractive dividend yields and continued support from a robust housing sector, REITs have experienced an exponential increase in demand.
It is worth noting, however, that there is a significant caveat: REIT deals that were once commonplace on the market are harder to come by. Some would go as far as saying that REITs have become overextended.
The 10 largest REITs in the U.S. "currently trade at an average price-to-earnings multiple of 33x, compared to the S&P 500 which trades at 24x earnings," according to Nasdaq.com.
The disparity in each asset's average price-earnings ratio echoes the latest sentiment of investors, as REITs are simply not as cheap as they used to be.
Although one could argue that REITs are overextended, there are still incredible deals to be found for those who know where to look, though investors may need to alter their search criteria. Although the REIT environment has capitalized on a developed real estate market, it may be time to diversify.
In addition to the developed assets buttressing the REIT market, investors should look into emerging markets or those piggybacking off attractive valuations, favorable demographics and brimming with untapped potential.
Not unlike standard stock portfolios, REITs should be diversified to mitigate risk, but in this case, diversification may result in encouraging dividend potential.
Instead of relegating search criteria to familiar U.S. companies, look farther than stateside. Emerging real estate markets in other countries may hold the key to attractive dividends that have yet to be overextended like their U.S. counterparts.
Particularly encouraging are several emerging markets located in Latin America, as discounts on REITs can still be found there. What's more, their cheap prices are complemented by dividend yields fully capable of eclipsing those with which we have become familiar in the U.S.
"Latin American REITs are expected to grow revenue by nearly 30% in 2017," whereas analysts expect U.S. REITs to cool off from their torrid pace, according to Nasdaq.
Latin American REITs warrant U.S. investor attention. That begs the question, how can American investors intent on diversifying their real estate portfolios with emerging market fundamentals capitalize in Latin America?
It turns out that the Tierra XP Latin America Real Estate Exchange-Traded Fund (LARE) has already done all the heavy lifting.