Real Estate Investment Trusts (REITs) are a popular investment for income-oriented investors. REIT stocks offer investors exposure to the real estate market without having to worry about the maintenance and upkeep required by landlords.
REIT stocks will never be among the soaring growth stocks, but that's not why investors choose them. The goal is constant sales and results that fuel a stable and ideally growing dividend. Because REITs are obliged to distribute up to 90% of their profits to the shareholders.
During the pandemic, the demand for housing increased sharply. And with the economy reopening, commercial and industrial apartments are also showing strong demand. This demand was reflected in the quarterly results of many REIT stocks.
And the good news is that there is no sign that growth will slow any any time soon. With that in mind, here are seven high quality REIT stocks that can help you capitalize on the current real estate market.
- AGNC Investment Corp. (NASDAQ:AGNC)
- Annaly Capital Management (NYSE:NLY)
- Real estate income (NYSE:Ö)
- Sun communities (NYSE:SUI)
- Duke Realty Corp. (NYSE:DRE)
- CubeSmart (NYSE:DICE)
- Vici properties (NYSE:VICI)
High quality REIT stocks: AGNC Investment Corp. (AGNC)
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AGNC Investment Corp. is the first of several Mortgage REITs (mREITs) on this list. Instead of investing in real estate, mREITs invest in mortgages and mortgage-backed securities (MBS). The benefit for investors is that these companies generally offer excellent returns. However, they also harbor an above-average risk, which is due, among other things, to a higher debt burden.
Specifically for AGNC, they invest in government-secured mortgages. In early June, AGNC shares had risen to nearly $ 19. The stock has given up most of those gains and is only trading at around 2% gain as of this writing. However, investors receive a monthly dividend with a yield of 8.99%.
In its latest earnings call, management said it was forecasting the Federal Reserve to throttle in early 2022. They are also on board with the current belief that inflation will be temporary. Therefore, the company expects interest rates to stay in the range. This combination should allow the company to improve its investment opportunities due to the low leverage and strong liquidity.
Annaly Capital Management (NLY)
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The second of the mREITs on this list is Annaly Capital Management. Annaly is the largest mREIT by market capitalization. Like AGNC, the company buys mortgage-backed securities and then trades them. In fact, the agency's MBS makes up nearly 90% of the company's portfolio.
InvestorPlace's Bob Ciura recently awarded NLY shares its seal of approval for income investors. Ciura commented, "The overall return potential is in the mid to high single digits, making the stock a quality position for income investors."
Last quarter, Annaly nearly doubled her quarterly growth in Mortgage Services (MSR). However, this was somewhat offset by the weakness in the agency MBS business. This weakness was mainly due to the volatility related to spread widening at lower rates and continued increased speeds and offers.
NLY stock is up about 14% over the past 12 months. The company currently has a dividend yield of over 10%, which is roughly the company's average since going public in 1997.
High quality REIT stocks: Realty Income (O)
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Another way to play the mREIT sector is with a company like Realty Income. The company invests in single-tenant commercial properties that are subject to triple-net (or NNN) leases. Realty Income operates in the United States, Puerto Rico, and the United Kingdom.
Over half of the company's tenants are investment grade and in defensive industries (e.g. discount stores, drug stores, and grocery stores). This gave him the opportunity to weather the pandemic.
Realty Income also delivers reliable income with an average rental period of nearly 10 years and a presence spread across 50 different industries. In fact, the company doesn't have a single tenant who accounts for more than 10% of its sales.
While all REITs are required to pay a dividend, not all dividends are created equal. Real estate income ranks above many other REIT stocks because of its status as a dividend aristocrat, meaning it has increased its dividend for at least 25 consecutive years.
Sun communities (SUI)
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The pandemic created a perfect storm for travelers. First, many Americans paid off their debts as they saw stimulus money added to their savings. Add the opportunity for many workers to work from anywhere and top it off with the launch of multiple Covid-19 vaccines and suddenly the backlog was unleashed.
And that was a benefit for Sun Communities. This REIT owns many RV parks, marinas and shared apartments. The company recently blew the top of its profits; with revenue of $ 603.9 million, an increase of nearly 100% over the previous year. The same applies to the company's net income, which has increased by 88% compared to the previous year.
All of this helped push the SUI share price to a new 52-week high. And while the stock is slightly below that high, terms remain favorable for the stock for the remainder of 2021.
Sun Communities doesn't offer the most impressive dividend in terms of yield (it's below 2% at the time of this writing). But the rate of return doesn't tell the whole story. In this case, Sun pays an annual dividend of $ 3.34 and has increased the dividend for each of the past four years.
High Quality REIT Stocks: Duke Realty Corp. (DRE)
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So far, this list of REIT stocks has focused on residential real estate. However, REIT investors can choose Duke Realty Corp. consider for their commitment on the commercial side. Duke Realty has a focus on industrial bearings. The company's share price has risen approximately 340% over the past 10 years, largely due to the growth of e-commerce and the company's relationship with Amazon (NASDAQ:AMZN).
Duke Realty is currently benefiting from favorable supply and demand trends. In this case, the demand for their properties exceeds supply for the second quarter in a row. It's one of the reasons DRE stock is up 28% over the past 12 months.
While Duke Realty is posting consistent, growing returns, it can't say the same about its earnings. The company has missed analyst expectations for four of the past eight quarters.
Nevertheless, three analysts have increased their price targets for the DRE share since the results were published on July 28, 2021. And for all of them, the stock climbs to at least $ 55, or nearly 10%, from its current level.
Duke Realty has increased its dividend for each of the past six years.
CubeSmart (CUBE)
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CubeSmart owns and operates storage units. This is a different way of playing the real estate market and is one of the hottest sectors in the last decade. According to Mordor Intelligence, the sector is valued at $ 64 billion annually through 2026.
And that trend has accelerated during the pandemic. First, there are many first-time home buyers entering the market. Second, many Americans are moving to benefit from a resilient job market.
But when they leave a residence, they need a place to store their belongings. This is where CubeSmart comes in. CUBE is one of the largest companies in the space with a market capitalization of $ 10 billion. It owns 1,200 properties worldwide with total rental space in excess of 37 million square feet.
CUBE stock is up 49% in 2021, and while the company's CEO Chris Marr believes growth will stabilize at some point in the future, he doesn't see any slowdown in sector growth anytime soon.
High quality REIT stocks: Vici Properties (VICI)
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The last REIT stock on our list is Vici Properties. Vici is a reopening game with assets focused on areas such as hospitality, recreation, entertainment and gaming. Vici recently announced a $ 17.2 billion acquisition of MGM growth properties (NYSE:MGP). This makes the company "America's largest owner of adventure real estate".
The VICI share was one of the REITS with the best performance last year with an increase of almost 19%. Share price growth has slowed significantly since April. But the MGP deal should be a catalyst as the company says the deal should add to profit almost immediately.
Not only does Vici have an enterprise value of over $ 45 billion, but it also offers a dividend that has grown over the past three years and is backed by its strong balance sheet. In the company's most recent earnings report, the company had 54 cents earnings per share from Adjusted Funds from Operation (AFFO) of $ 256.1 million. Additionally, the company forecasts full-year revenue between $ 1.010 billion and $ 1.035 billion, which is a 10% year-over-year increase at the lower end.
At the time of this writing, Chris Markoch held positions (neither directly nor indirectly) in the securities discussed in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com's posting guidelines.
Chris Markoch is a freelance financial writer who has covered the market for seven years. He has been writing for InvestorPlace since 2019.
source https://seapointrealtors.com/2021/08/09/7-high-quality-reit-stocks-to-buy-now-for-the-current-real-estate-market/
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