Duke Realty Corp (DRE), Health Care REIT, Inc. (HCN): Reap Dividends and Profits in Real Estate, the Easy Way

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some real-estate stocks to your portfolio, but don’t have the time or expertise to handpick a few, the Vanguard REIT Index ETF could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Vanguard ETF’s expense ratio — its annual fee — is a very low 0.10%. It also offers a significant dividend yield, recently near 3.6%.

This ETF has performed well, outstripping the world market over the past three, and five, years. As with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

Why real estate?
Perhaps because there’s a finite amount of it, real estate tends to increase in value over time, though not always in a straight line. Real estate investment trusts (REITs), meanwhile, offer an extra benefit, via their requirement to pay out at least 90% of their income in the form of dividends.

More than a handful of real-estate companies had solid performances over the past year. Duke Realty Corp (NYSE:DRE) surged 27%, for example, and yields 3.9%. The company specializes in industrial, health-care, and office properties. Its revenue hasn’t been growing much in recent years, though, and its bottom line has been in the red (with a gain in the last quarter). The company’s latest earnings report will be out next week, and its last one revealed rising occupancy levels and core funds from operations (FFO), as well as the refinancing of debt. Management has explained that it’s repositioning its assets, in part by selling off suburban office properties.

Health Care REIT, Inc. (NYSE:HCN) gained 13%, and yields 4.5%. It acquired Sunrise Senior Living, Inc. (NYSE:SRZ), boosting its elder-care facility portfolio with units that command above-average rental rates. Meanwhile, same-store margins and occupancy rates have been growing. Obamacare will boost the number of people receiving medical care, and that’s likely to help REITs such as this one, which focus on health-care properties. The REIT has grown aggressively via acquisitions, and now sports a market cap above $17 billion. That means, though, that its growth rate is likely to slow.