REIT Fears Could Give Way to Opportunity with This ETF
•February 20, 2026
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Companies Mentioned
Why It Matters
The mispricing presents a rare opportunity to capture high yields that outpace Treasury rates while positioning for a sector rebound driven by lower rates and defensive demand.
Key Takeaways
- •IYRI distribution near 11% with 3.15% SEC yield.
- •REITs trading 15‑20% below NAV, first since 2008.
- •42% of REITs yield more than 10‑year Treasuries.
- •Bank of America sees 2026 best REIT setup.
- •Net flows into real estate up 5.4% last year.
Pulse Analysis
The recent pullback in commercial‑real‑estate investment trusts reflects a broader market anxiety about artificial‑intelligence disruptions, yet the underlying fundamentals remain solid. AI concerns have amplified short‑term volatility, but they also mask the sector’s historically stable cash flows and its role as an inflation hedge. As interest‑rate expectations soften, investors are re‑evaluating REITs not merely as income generators but as potential beneficiaries of a lower‑cost financing environment, setting the stage for a strategic re‑entry.
IYRI differentiates itself by layering a covered‑call strategy atop a basket of high‑yielding REITs, effectively boosting current income while capping upside. Its near‑11% distribution and 3.15% SEC yield place it well above the average dividend yield of traditional equity REITs, and the ETF’s active management seeks to capture selective upside when market sentiment improves. The fund’s pricing discount—15‑20% below net asset value—mirrors the broader sector undervaluation, offering a margin of safety that appeals to tax‑efficient income investors seeking both yield and capital preservation.
Looking ahead, the convergence of attractive yields, discounted valuations, and a favorable macro outlook could reignite capital flows into real‑estate assets. Bank of America’s projection of 2026 as a peak setup underscores the expectation that post‑pandemic weaknesses will transition into tailwinds, especially as defensive sectors gain favor. For portfolio managers, integrating IYRI or similar high‑income ETFs may provide a dual advantage: immediate cash generation and exposure to a sector poised for a rebound, making it a compelling addition to diversified, income‑focused strategies.
REIT Fears Could Give Way to Opportunity with this ETF
Commercial real estate investment trusts (REITs) recently tumbled, highlighting that segment’s perceived vulnerability as yet another “victim” of the artificial intelligence (AI) trade, but investors’ apprehension regarding select real estate stocks could evolve into a buying opportunity.
That could be good news for an array of ETFs, including the NEOS Real Estate High Income ETF (IYRI). IYRI is an actively managed covered call ETF, meaning it adds another layer of income to a sector long favored for its income‑generating traits.
As of the end of January, the NEOS ETF sported a distribution rate of nearly 11 % and a 30‑day SEC yield of 3.15 %, confirming it delivers the goods. Importantly, IYRI offers avenues for some upside participation – something to consider at a time when REITs could be primed to move higher with the help of interest‑rate cuts and as some market observers see value in defensive sectors.
A Good to Investigate IYRI
As noted above, some investors are concerned about the effects AI will have on some corners of the real estate sector. That shouldn’t be ignored, but nor should the fact that some experts are constructive on the sector in broad terms.
“We have a favorable view on real estate due to a resilient economic environment and quality of the sector,” notes Bank of America Research. “2026 is what the REITs equity research team led by Jeff Spector calls the ‘best setup in years’ as the post‑pandemic commercial real estate weakness turns into a tailwind, combined with the already compelling yields on higher‑quality REITs, despite the discounts also being higher than average.”
Perhaps adding to the case for ETFs such as IYRI is the fact that REITs, broadly speaking, sport higher yields than government debt. As Bank of America notes, 42 % of listed REITs sport yields in excess of 10‑year Treasuries, the highest among the 11 global industry classification standard (GICS) sectors.
Other factors could bode well for IYRI, including some active managers overlooking the real estate sector and attractive valuations in the group.
“The real estate sector is neglected by long‑only managers and hedge funds and had a 5.4 % increase in net flows over the last year,” adds Bank of America. “REITs are trading 15‑20 % below NAV for the first time since the 2008 financial crisis and the 2000 crash. After all‑time highs in 2022, real estate ETF forward PE has fallen back towards historical averages.”
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