The State Street SPDR Dow Jones REIT ETF (NYSEMKT:RWR) offers a higher trailing yield and stronger one-year performance, while the Schwab U.S. REIT ETF (NYSEMKT:SCHH) offers a much lower expense ratio and broader holdings.
Both funds provide exposure to U.S. equity real estate investment trusts that track the performance of the domestic real estate sector. While SCHH prioritizes ultra-low costs, RWR follows a capped index that has recently delivered higher total returns and distributions for its shareholders.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The Schwab fund is notably more affordable with a 0.07% expense ratio compared to 0.25% for the SPDR fund. However, the SPDR fund may appeal to income seekers due to its higher 3.20% trailing payout and recent performance lead.
Performance & risk comparison
What’s inside
State Street SPDR Dow Jones REIT ETF (NYSEMKT:RWR) holds 97 stocks and is 100% focused on the real estate sector. Its largest positions include Welltower (NYSE:WELL) at 11.14%, Prologis (NYSE:PLD) at 9.49%, and Simon Property Group (NYSE:SPG) at 4.54%. It was launched in 2001. State Street SPDR Dow Jones REIT ETF has paid $3.78 per share over the trailing 12 months, which, at its recent ~$116.70 share price, yields 3.20%.
Schwab U.S. REIT ETF (NYSEMKT:SCHH) also provides 100% exposure to real estate but includes a larger pool of 121 holdings. Top positions include Welltower at 11.08%, Prologis Reit at 8.65%, and Simon Property Group Reit at 4.73%. It was launched in 2011. Schwab U.S. REIT ETF has paid $0.66 per share over the trailing 12 months, which, at its recent ~$24.34 share price, yields 2.70%.
For more guidance on ETF investing, check out the full guide at this link.
Which is the better buy
The State Street SPDR Dow Jones REIT ETF (RWR) and the Schwab U.S. REIT ETF (SCHH) are both real estate-focused exchange-traded funds (ETFs). However, there are some important differences to these funds that investors should be aware of. Let’s have a closer look at each one.
First, there’s RWR. This fund offers exposure to the U.S. real estate market through its ownership of many real estate investment trusts (REITs). REITs are companies that own, operate, or finance income-producing property. They are required to distribute at least 90% of their taxable income back to shareholders through dividends. As a result, RWR has a healthy dividend yield of 3.2%. As for performance, RWR has delivered a total return (inclusive of dividends) of 67% over the last 10 years, equating to a compound annual growth rate (CAGR) of 5.3%. In terms of fees, the fund has an expense ratio of 0.25%, which is moderate.
Then, there’s SCHH. Like its counterpart, SCHH exclusively holds U.S. REITs. However, there are some key differences. For one, SCHH has a much lower expense ratio of 0.07%. That may not seem very big, but lower fees can add up over time. In addition, SCHH holds slightly more stock at 121 than RWR at 97. That gives SCHH more diversification, which can be important to many investors. On the flip side, SCHH has generated a total return of 47% over the last 10 years, with a CAGR of 3.9%. That’s less than RWR. SCHH also has a lower dividend yield of 2.7%.
In summary, cost-conscious investors or those seeking greater diversification may favor SCHH, while those focused on yield, or on better historical returns, may select RWR.
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Jake Lerch has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Prologis and Simon Property Group. The Motley Fool has a disclosure policy.
SCHH vs RWR: Which REIT ETF Fits Your Portfolio was originally published by The Motley Fool
