Greetings!
Below please find the ETF Spotlight newsletter containing highlights of the research and data on www.etfresearchcenter.com as well as a recap of the past week's action in the ETF market.
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In this week's issue
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 Real Estate Investment Trusts (REIT)
- Chart of the week: REIT Cash Flow Margins
- Fund Focus: Vanguard REIT ETF (VNQ)
- Revisions, asset flows & short interest
- 2011 cash flow per share estimates, cash flow margins, and P/CF multiples for major ETFs
- Market monitor - movers & categories
To download the full newsletter click here.
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| Chart of the week |
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REIT Cash Flow Margins
Cash flow margin is examined by analysts as a key measure of a firm's ability to turn revenue into cash. For Real Estate Investment Trusts (REIT) it is more relevant than figures such as EPS which don't accurately reflect the economic value-add from leasing what until recent years were generally appreciating real estate assets.
In any case, we ranked the 21 REIT ETFs in our coverage universe by cash flow margin. The top 10, shown below, range from 51% down to 34%. Diversified U.S. REITs were at the top of the list, while specialty and foreign REITs tended to place further down.
Although none on the list have a very good ALTAR ScoreTM, that measure which is ultimately based on earnings may again not be the best indicator of a REIT's investment merit. So instead we look more closely at cash flow multiples and yield of the Vanguard REIT ETF (VNQ)--number three on the chart below--in this week's Fund Focus,
Download the full newsletter here.
Chart: REIT Cash Flow Margins
2011E cash flow divided by revenue
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| Fund Focus |
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Vanguard REIT ETF (VNQ)
VNQ is a diversified REIT (including residential, office, retail and other properties) and has by far the lowest expense ratio and most assets of all the REIT ETFs we cover. In any case, shares have more than doubled since their 2009 low and now trade at a multiple of 10x 2011 cash flow per share estimates and yield just 3.7%, scarcely better than 10 year Treasuries. This implies a rather steep price on these assets especially given the lingering uncertainty surrounding U.S. real estate.
To download the full newsletter, click here.
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