Personally, I was looking for more exposure to the Real estate sector as a dividend-focused investor, as personally, I felt I didn't have enough exposure to this sector through my individual stocks and ETFs. In my search, I came across iShares Developed Markets Property Yield UCITS ETF. I have the majority of my stock portfolio in ETFs I find them a passive way to invest money wisely and they don’t require much maintenance in terms of keeping track of stocks etc. For me, it is more of a set-and-forget approach instead of keeping track of all companies in a portfolio.
An exchange-traded fund is represented as a stock in the stock market so by holding this specific stock you are holding a basket of stocks that correspond to an index (portfolio benchmark) that it is tracking.
This is a Real estate ETF and its main goal is to track the developed markets' real estate sector, at the time of writing is paying out a dividend yield of 3.5% which is decent for this sector.
The current benchmark/portfolio
The Fund seeks to track the performance of an index composed of listed real estate companies and Real Estate Investment Trusts (REITS) from developed countries, excluding Greece, which also comply with dividend yield criteria.
The ETF currently holds about 377 stocks which provide more than plenty of diversification in this sector. When it comes to geographical diversification, this ETF is mainly focused on the United States at about 60%, allocation followed by Japan at 10% and Hong Kong at 5%.
When looking at ETFs I find it crucial to have a look at the top 10 holdings to get a good feeling of the ETF and to see if it fits my profile and to see if these would be companies I would invest myself in individually. In this case, the top 10 holdings are representing more than 28% of the portfolio.
The top 10 holdings:
PROLOGIS REIT INC - 8%
PUBLIC STORAGE REIT - 3%
SIMON PROPERTY GROUP REIT INC - 3%
REALTY INCOME REIT CORP - 3%
WELLTOWER INC - 2%
VICI PPTYS INC - 2%
DIGITAL REALTY TRUST REIT INC - 2%
AVALONBAY COMMUNITIES REIT INC - 2%
ALEXANDRIA REAL ESTATE EQUITIES RE - 2%
EQUITY RESIDENTIAL REIT - 2%
Conclusion:
Overall, this ETF has 377 holdings, which is plenty considering it is a sector ETF, with that being said, this ETF will play a smaller part in my portfolio, and based on its holdings and exposure I wouldn't hold this ETF as a sole holding in my portfolio, which I understand as that is not the intention. I like the exposure to these companies, as these are staple REIT companies I would have invested in, the geographical allocation fits my needs with the majority of the concentration in the US, and the top 10 holdings making 28% means that these ETFs provide plenty of diversification.
Expense Ratio
When it comes to the expense ratio, the lower the better and I would generally like to see an expense ratio below 0.5%. Overall in Europe, I find the ETFs available a bit more expensive than what is available in the United States. In this case, this ETF has an expense ratio of 0.59% Which is very high in my opinion and may affect my returns over a longer period.
Performance
Since this is more of a dividend-oriented ETF I want to look at both the capital appreciation, as well as the dividend growth over the last couple of years. Purely looking at capital appreciation over the last 5 years this fund has increased by over 9%. Regarding dividend payout, In 2019 this fund was paying out 0.73 Euro and this last year it paid out 0.78 Euro. In the last few years, this means that we had an increase of 7% compared to 2019.
Based on this information, I conclude that the appreciation in the stock price was there but was very modest, the same holds true about the dividend increases increases
Pros
I find that there is quite some nice diversification in this fund in terms of geographical and other allocations and amount of stocks.
Secondly, since it is an ETF I find it a good way to set and forget and is quite passive in nature.
Thirdly, it is a Real estate focused ETF which is sometimes lacking in other ETFs
Fourthly, the top holdings are companies that I know and would like to have as part of my portfolio overall.
Cons
This is a sector ETF, which means it doesn't have many holdings, and I personally wouldn't use it as a single ETF in a portfolio, however, this is not the purpose either.
Secondly, this ETF has too high of an expense ratio for my liking which would have been compensated if the performance were great
Thirdly, the performance in terms of capital appreciation and income increase hasn't been that good
Fourthly, may be too much exposure to the United States and Japan
Finally, as with all funds, it is not possible to choose the individual holdings so basically whether you like a stock or not in a fund, you are holding that stock indirectly, basically you are buying the winners and losers and trying to achieve a market return based on the index.
Conclusion
I currently don't hold this ETF due to the cons and the performance, and even though it is a popular ETF I went with another ETF which is less popular but fits my criteria better.
Disclaimer: I am not a financial advisor, this blog is centered around my opinion and should not be viewed as legal, professional, or financial advice.
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