A-REITs: Bad habits are back

High gearing levels and stretched payout ratios have returned in the A-REIT sector.

Summary: Australian real estate investment trusts have performed well in recent times as investors flock to their attractive and reliable yield, with the sector becoming one of the key parts of any income-focused portfolio. But moving forward there are a number of factors suggesting that the recent capital gains may not be sustainable.

Key take-out: The risk of capital declines with holding A-REITs doesn’t justify the slight yield advantage when compared to other quality growth stocks.

Key beneficiaries: General investors. Category: Investment Portfolio Construction.

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