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Quarter-End Insights

Our Outlook for Real Estate Stocks

In their search for a sustainable yield, investors have bid up real estate stocks.

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  • Real estate stocks are trading at a slight premium to fair value.  
  • Equity REIT dividend fundamentals remain healthy, and we think dividend growth exceeding inflation is possible in the near to medium term. 
  • There remain significant upside and downside drivers to near-term real estate stock pricing sectorwide, which have little to do with organic cash-generating ability.  

Lured by sustainable cash yields and a slowly improving U.S. economic picture, investors bid up real estate stocks across industries, giving brief pause when eurozone concerns came to a head. As capital market stability returned toward the end of the quarter, it appears that real estate stocks, in aggregate will likely finish at a slight premium, in aggregate, to our estimate of fair value.  

Jason Ren does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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