Here's How Invesco KBW Premium Yield Equity REIT ETF Beats The Market From Here

By Matt DiLallo – Feb 20, 2026 at 3:00PM ESTKey PointsThe Invesco KBW Premium Yield Equity REIT ETF invests in smaller REITs with high dividend yields. The fund offers an attractive income stream. Falling interest rates could be the key to beating the market. We’re bullish on these 10 stocks ›NASDAQ: KBWYInvesco Exchange-Traded Fund Trust II - Invesco Kbw Premium Yield Equity REIT ETFToday's Changeangle-down(0.74%) $0.12Current Price$16.40Price as of February 20, 2026 at 4:00 PM ETThe fund's focus on high-yielding REITs makes it highly sensitive to interest rates.The Invesco KBW Premium Yield Equity REIT ETF (KBWY +0.74%) aims to provide investors with an above-average income yield. The exchange-traded fund's (ETF) strategy is to invest in smaller real estate investment trusts (REITs). It weights these REITs by yield, which enables it to generate lots of dividend income to distribute to investors. Here's a look at how this REIT ETF investment can beat the market. Image source: Getty Images. A closer look at this REIT ETF The Invesco KBW Premium Yield Equity REIT ETF currently holds more than 30 REITs. Its five largest holdings are: REIT Allocation in KBYW Market cap Dividend yield Innovative Industrial Properties 5.77% $1.3 billion 16.4% Community Healthcare Trust 5.59% $486.6 million 11.2% Global Net Lease 4.40% $2.1 billion 7.9% Gladstone Commercial 4.40% $665.7 million 9.8% Alexandria Real Estate Equities 4.01% $9.2 billion 8.8% Data source: Invesco Premium Yield Equity REIT ETF and Google Finance. These REITs currently have yields more than double the sector's average of around 4%. They're also a lot smaller than the largest real estate stocks by market cap, some of which are worth over $100 billion. The fund's focus on higher-yielding REITs has enabled it to offer investors a lucrative income stream. Over the last 12 months, the fund's distributions have yielded more than 9%. ExpandNASDAQ: KBWYInvesco Exchange-Traded Fund Trust II - Invesco Kbw Premium Yield Equity REIT ETFToday's Change(0.74%) $0.12Current Price$16.40Key Data PointsDay's Range$16.24 - $16.4052wk Range$13.86 - $17.83Volume117K However, while the fund offers a high income yield, its total return (dividends plus price appreciation) has been severely lacking. Its total return over the past year is -0.4%, while its average annual total return since inception (December 2010) is 4%. It has underperformed the S&P 500 and the REIT sector as a whole. A look at what could turn this REIT ETF around REITs are highly sensitive to interest rates, especially higher-yielding REITs. Higher interest rates increase borrowing costs, making it more expensive for REITs to refinance debt and to fund expansion initiatives such as development projects and acquisitions. Smaller REITs tend to have even higher borrowing costs than their larger rivals because they typically have lower credit ratings. Additionally, higher rates make lower-risk fixed-income investments, such as bonds, more attractive to income-focused investors. As a result, the value of higher-risk income investments, such as commercial real estate, falls, which increases their income yield to compensate for their higher risk profile. Whereas higher rates are a headwind for small, lower-yielding REITs, lower rates are a significant tailwind. It would lower borrowing costs and boost the value of their portfolios. As a result, a meaningful decline in interest rates would likely enable the Invesco KBW Premium Yield Equity REIT ETF to beat the market. Lower rates would benefit this income-focused investment Higher interest rates over the past several years have weighed on the performance of the Invesco KBW Premium Yield Equity REIT ETF. However, if rates start to fall, this headwind could shift into a major tailwind. Read NextJan 20, 2026 •By Todd ShriberInvesco KBW Premium Yield Equity REIT ETF: Buy, Sell, or Hold in 2026?Jan 19, 2026 •By Rick Munarriz3 Things Investors Need to Know About Invesco KBW Premium Yield Equity REIT ETF in 2026About the AuthorMatt DiLallo has been a contributing Motley Fool stock market analyst specializing in covering dividend-paying companies, particularly in the energy and REIT sectors, since 2012. He also covers pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.TMFmd19X@MatthewDiLalloStocks MentionedInvesco Exchange-Traded Fund Trust II - Invesco Kbw Premium Yield Equity REIT ETFNASDAQ: KBWY$16.40 (+0.74%) $+0.12Alexandria Real Estate EquitiesNYSE: ARE$53.61 (+0.39%) $+0.21Innovative Industrial PropertiesNYSE: IIPR$45.71 (1.40%) $0.65Global Net LeaseNYSE: GNL$9.71 (+0.88%) $+0.09Gladstone CommercialNASDAQ: GOOD$12.55 (+4.50%) $+0.54Community Healthcare TrustNYSE: CHCT$17.09 (+0.41%) $+0.07*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.