Comparative Performance of REITS and Commercial Bank Shares in Nigeria Stock Exchange

Abstract

This paper compares the performance of Real Estate Investment Trusts (REITs) and commercial bank shares from 2011 to 2020 for the purpose of providing investments with optimal performance for savvy investors. Share prices and dividends from annual reports were used to calculate income, capital, and total returns. Returns and risks were measured using Mean and Standard Deviation; while risk adjusted rate of return tool measured the general performance of N-REITs and bank shares. REITs generally underperformed, compared to commercial bank shares. Only Skye Shelter REITs excelled in income return. N-REITs were found to be less risky than commercial bank stocks, but underperformed when compared to commercial banks. Skye Shelter REITs showed highest total return; while UPDC and Union Homes outperformed Access Bank and UBA. Only Polaris, GT, and Zenith banks higher income returns from the REITs. Overall, bank shares are riskier than REITs. Bank stocks offer higher returns with greater risk, whereas REITs provide stable returns with lower volatility, which is suitable for conservative investors. In conclusion, the combination of stable returns on REITs and the volatile returns on bank stocks will reduce the overall portfolio risk. Hence, investors should consider risk management by combining investment with different risk-return characteristics.