Cohen & Steers Real Estate Opportunities and Income Fund

RLTY

Market cap $255M

Cohen & Steers Real Estate Opportunities and Income Fund offers leveraged exposure to high-quality REITs, preferred stock, and bonds with an 8.6% yield. RLTY currently trades at a 5% discount to NAV, and benefits from renewed interest as the Federal Reserve resumes rate cuts, improving real estate prospects. Despite attractive valuations, commercial real estate faces risks from economic uncertainty, rising costs, and sector-specific pressures, warranting caution.

Market timing is futile; a disciplined, diversified, and rules-based approach is essential for long-term investing success. A Near-Perfect Strategy portfolio aims for consistent income, growth, and lower volatility through diversification and strategic planning. The portfolio targets 6% income and S&P 500-beating returns, with lower volatility and drawdowns, making it suitable for investors seeking financial freedom or retirement income.

A diversified, funds-only portfolio can deliver reliable 6-7% income and market-matching growth, ideal for retirees seeking simplicity and peace of mind. Asset allocation spans dividend growth, bonds, real estate, energy, covered calls, utilities, commodities, preferreds, and specialty funds for broad diversification. Fund selection prioritizes low fees, competent management, and minimal leverage, balancing income, growth, and capital preservation across market cycles.

RLTY offers an attractive 8.6% yield, diversified real estate exposure, and currently trades at a modest discount to NAV, making it a Buy. The fund's income is enhanced by leverage, which increases yield but adds risk, especially in declining markets or rising rate environments. RLTY is well positioned to benefit from future Fed rate cuts, which should boost both NAV and dividends for investors.

I prefer funds like Cohen & Steers Real Estate Opportunities and Income Fund for their high-yield and monthly cash flow without tenant headaches. RLTY offers a nearly 9% dividend yield, superior diversification, and better financing rates, making it attractive despite the current high-interest rate environment. Leverage has impacted RLTY's performance, but potential future interest rate cuts could serve as a positive catalyst for growth and improved valuations.

REITs have been facing pressure since the Fed raised rates in 2022; after starting to recover a bit, the broader market downturn more recently has pushed it lower again. RLTY trades at an attractive relative discount and invests in the beaten-down REIT space. The fund has seen underperformance against its sister funds since inception; we attempt to outline why and why RLTY is still a solid choice today.

The real estate sector, along with other value-oriented sectors, has held up well despite broader equity market declines. However, REITs still remain depressed and have not fully recovered since the Fed raised rates aggressively in 2022. This can make the space still relatively attractive for long-term investors looking for value.

The Cohen & Steers Real Estate Opportunities and Income Fund balances high-yielding REITs for steady income and growth in sectors like healthcare and data centers. Despite some impressive individual performances, many top holdings face sluggish revenue growth, erratic cash flow, and potential dividend cuts, dampening long-term potential. RLTY's recent 14.05% one-year return is promising, but high concentration risk and broader REIT sector struggles make it a cautious hold for long-term investors.

The Cohen & Steers Real Estate Opportunities and Income Fund offers an 8.30% yield, higher than any of the index funds tracking the sector. Active management allows the fund to avoid struggling real estate companies, providing a more secure income stream compared to passive index funds. The fund is not a pure play real estate fund as some of its peers, and it has a lower yield than its peers.

Higher long-term yields have increased the risks in the REIT world. This has, in turn, opened some interesting pockets of opportunity. In this article I share two picks (one direct REIT and one REIT driven CEF), which produce 8%+ in monthly distributions.