Dividends Premium REITs: October 2025

REITs: Rock Bottom Investor Expectations With 3 Major Upside Catalysts

Editor’s Note: Welcome to your October Dividends Premium REITs. Thanks for reading!

It was a largely flat month for most of our 84 real estate investment trust coverage universe. The Real Estate SPDR ETF (XLRE) is in the black, up 7 percent, in line with the First Rate REITs list average. That’s well behind the S&P 500 at 15 percent, as well as the Utilities SPDR ETF (XLU) at 22 percent.

REITs’ underperformance is due mainly to investors’ worries about inflation and the employment. But the best in class will again prove their resilience as businesses in Q3 results and updated guidance. And we could see a big beat of gloomy expectations in the coming weeks, particularly in out of favor property sectors like apartments.

My top fresh money buys this month are the first two Q3 reporters from the First Rate REITs list. Both topped expectations and are bringing back buyers. And I expect other REITs will do the same.

Got a question about a particular REIT, a property sector or my general outlook? Then please join my Dividends Roundtable forum on Discord, which I host 24-7.—RC

REITs in Q4: Undervalued and Under-owned With 3 Major Upside Catalysts

Extreme valuations and weightings for the market leading Tech stocks, persistent inflation, political turmoil, trouble in the regional banks, weakening employment and now the second longest US government shutdown in history:

The investment outlook for Q4 and 2026 is carrying more than the usual uncertainly. But however things shake out, top quality REITs feature three powerful potential upside catalysts:

· Growing scarcity of multiple property types relative to long-term demand.

· Re-balancing of the S&P 500 from historically over-weighted Big Tech to under-owned sectors like REITs.

· Moderation of borrowing costs that will spur growth and increase the relative attraction of dividend paying stocks.

Real estate investment trusts have greatly underperformed the S&P 500 so far this decade. The property sector recovered sharply from the pandemic year to reach new highs in early 2022, then plunged again when the Federal Reserve began pushing interest rates higher. And after a solid recovery in 2024, most REITs have since stalled out, well below their peaks.

There are exceptions. Indoor mall leader Simon Properties (NYSE: SPG) is now roughly six times its price in early 2020. The greatly consolidated senior housing sector continues to push higher, with leader Welltower (NYSE: WELL) up more than 40 percent year to date. Ventas Inc (NYSE: VTR) is up better than 40 percent since I added it to the First Rate REIT list in late June.

Other property sectors that had been strong, however, have basically run out of steam in 2025. Data center REITs, for example, are no longer getting any lift from artificial intelligence excitement, despite strong sales growth. Leader Equinix Inc (NSDQ: EQIX) is underwater by almost -11 percent year to date. And while First Rate REIT American Tower (NYSE: AMT) is still solidly ahead, the stock is also once again back in bargain territory under $200 a share.

Apartments have also weakened greatly. Both AvalonBay Communities (NYSE: AVB) and UDR Inc (NYSE: UDR) are underwater by nearly -12 percent for 2025. And Mid-American Apartment Communities (NYSE: MAA) isn’t far behind, as investors worry about the impact of weaker employment on apartment occupancy.

The upshot is REITs are now a smaller than ever piece of the S&P 500, weighing in at a collective 1 percent or so. Welltower and Prologis Inc (NYSE: PLD) are the largest REITs in the index, each weighing in at 0.21 percent. American Tower is still at 0.16 percent followed by Equinix at 0.14 percent. But the largest conventional REITs in the index are Realty Income (NYSE: O) and Simon Properties at just 0.1 percent each.

REITs’ underweight is a stark contrast to the 37 percent plus of the S&P 500 that’s in just 8 Big Tech stocks. And two of those represent a single company, Alphabet.

There’s no magic rule that Big Tech can’t reach 50 percent of the S&P 500 or even more. And the most heavily weighted stock NVIDIA (NSDQ: NVDA) could reach 100 or 200 times earnings, up from the current very expensive 50 times.

But reversion to the mean is ultimately the surest long-term stock market prediction you can make. And even a relatively mild re-balancing from Big Tech to other sectors would spur massive buying of REITs.

Conversely, REITs’ historic underweighting in the S&P 500 is one reason not to fear a Big Tech/S&P pullback or even a crash. And the property sector also trades at relatively low multiples to earnings and underlying property values, as well as the highest yields in several years.

Lower REIT Borrowing Costs Ahead

Higher for longer interest rates are probably the most important reason why REITs’ returns have lagged the past few years, and therefore why the property sector is historically underweighted. And not coincidentally, the under-performance began when the Federal Reserve reversed several years of effectively zero interest rates—by pushing up the Fed Funds rate at the fastest clip since the 1980s.