Fundamental Income Increases Monthly Cash Dividend for the Net Lease Corporate Real Estate ETF by 5.26%
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Insights
The decision by Fundamental Income to increase the dividend of its Net Lease Corporate Real Estate ETF (NETL) is a reflection of the underlying financial health and confidence in the consistent cash flows generated by net lease real estate investments. A 5.26% dividend increase is significant as it signals to investors the potential for a stable and possibly growing income stream. This is particularly attractive in an investment climate where yield is highly sought after, especially in the context of real estate investment trusts (REITs) that typically offer higher dividends.
It is important to note that the ETF's annualized NAV return since inception stands at 2.98%, which may be considered modest. However, the 30-day SEC yield of 5.76% is a robust figure, indicating that the fund is managing to offer a competitive yield in the current market. Investors will need to weigh the fund's past performance and current yield against their individual investment goals and the broader market environment.
The net lease real estate sector is characterized by its predictable cash flows due to the nature of the leases, where tenants are responsible for most property expenses. This structure can provide a buffer against economic downturns, as the operational costs are largely borne by the tenants. The ETF's consistent dividend payout, now for the 34th consecutive month since switching from quarterly dividends, demonstrates the reliability and appeal of this investment structure.
From a market perspective, the increase in dividend payout by NETL could potentially attract more investors to the fund, thereby increasing its market capitalization and liquidity. This could also have a ripple effect on the sector, prompting other similar funds to evaluate their dividend policies to remain competitive.
Net Lease REITs are a unique subset of the real estate market, offering investors exposure to properties leased to tenants who pay most or all of the property-related expenses. This type of arrangement typically leads to lower volatility in income streams for the REIT. The increase in NETL's dividend may reflect not only the fund's performance but also the underlying strength and stability of the net lease sector, which has been resilient despite broader economic uncertainties.
Investors considering this ETF should understand the nuances of net lease investments and the specific tenant profiles, as the quality of the tenants can greatly affect the risk profile. The fact that many tenants are household names could imply a lower risk of default, which is an important consideration when evaluating the long-term sustainability of the dividend.
“Investing in Net Lease REITs is essentially investing in asset-backed, corporate credit,” said Alexi Panagiotakopoulos, Fundamental Income’s Chief Investment Officer. “These companies pay dividends from consistent contractual cash flows generated by leases in which the tenants, many of which are household names, are responsible for most, if not all, property expenses, which makes the cash flow predictable.”
As of January 31, 2024, NETL’s annualized NAV return since inception was
About the Net Lease Corporate Real Estate ETF
NETL is a rules-based, passive ETF seeking to provide pure play exposure to single tenant, freestanding real estate. The Fund consists of 21 publicly traded net lease REITs, collectively owning 30,368 properties. As of 12/31/23, the average remaining lease term for tenants is 15.3 years and the occupancy rate is
Inception Date: 3/22/19
Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For current month end standard performance and expenses, visit https://netleaseetf.com/net-lease-fund-summary/.
Dividend Income is not guaranteed and is subject to change.
Investments involve risk. Principal loss is possible. The fund may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Index, and consequently the Fund, is expected to concentrate its investments in real estate companies. As a result, the value of the Fund’s shares may rise and fall more than the value of shares of a fund that invests in securities of companies in a broader range of industries.
Investments in real estate companies and REITs involve unique risks, including limited financial resources, they may trade less frequently and in limited volume, and they may be more volatile than other securities. In addition, securities in the real estate sector are subject to certain risks associated with direct ownership of real estate and the risk that the value of their underlying real estate may go down. Companies in the Net Lease Real Estate sector may be affected by unique factors related to leasing properties to single tenants including dependence on the financial performance of its tenants and lease terms related to rent escalations based on economic measurements. The fund may invest in foreign securities which involves political, economic and currency risks, differences in accounting methods and greater volatility. Investments in small and mid-sized companies have historically been subject to greater investment risk than large company stocks.
Carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund’s prospectus, which may be obtained by visiting www.netleaseetf.com. Read the prospectus carefully before investing.
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The 30-Day Yield represents net investment income earned by the Fund over the 30-Day period expressed as an annual percentage rate based on the Fund’s share price at the end of the 30-Day period.
NAV: The dollar value of a single share, based on the value of the underlying assets of the fund minus its liabilities, divided by the number of shares outstanding. Calculated at the end of each business day.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240227206428/en/
Fundamental Income Media Contact:
Alexi Panagiotakopoulos
Chief Investment Officer
alexi@fundamentalincome.com
602.481.9274
Source: Fundamental Income
FAQ
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