In the barren yield landscape of the last five years, real estate investment trusts have been one of investors' favorite places to find income. The MSCI U.S. REIT Index, which has a current yield of just under 4 percent, was up 30 percent last year. It has returned an average of more than 12 percent over the last five years — with close to half of that paid out in cash dividends to investors.
This year is a different story. With volatility returning to the stock market as it waits for the Federal Reserve to raise interest rates, the party could be over for REIT investors.
"The big challenge this year for REITs has been the uncertainty over interest rates," said Keven Lindemann, director of real estate for S&P Capital IQ. "The fundamentals for most property types are still good, but share prices are getting hit by concern over higher rates."