Overvalued? You better believe it!

What about the stock’s dividend? After all, investors usually buy REITs because they have above-average yields.

Sorry ... Archstone-Smith sports an indicated yield of — get this — 3.05%. That’s far below both short-term, risk-free rates (three-month bills recently yielded 5.08%) and longer-term Treasury yields (4.61% on 10-year notes). It’s less than half what the stock was yielding in early 2005. Heck, it’s the lowest I can find going all the way back to the mid-1980s.

So, given their deteriorating fundamentals, multi-decade-high valuations, and paltry yields, now is not the time to pile into apartment REITs. In fact, I’d be looking for the exits.

Until next time,

Mike

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