Real estate investment trusts (REITs) buy a great deal of properties, lease them out, and split the rental income with their investors. U.S. REITs are also required to pay out not lower than 90% of their taxable income as dividends to maintain up a positive tax rate.
That simple business model often makes REITs a sound investment for a lot of income investors, but rising rates of interest weighed down the sector for two reasons. First, higher rates made it dearer to purchase recent properties. Second, REITs lost their luster as income plays since the yields of risk-free CDs and T-bills soared above 5%.
But with rates of interest set to say no inside the near future, shrewd investors should pivot back toward REITs before the yield-starved bulls rush back. I believe these 4 resilient REITs are price buying immediately: Realty Income (NYSE: O), Vici Properties (NYSE: VICI), STAG Industrial (NYSE: STAG), and Digital Realty Trust (NYSE: DLR).
1. Realty Income
Realty Income is one among the many world’s largest REITs. It owns 15,450 properties inside the U.S., U.K., and Europe, and it leases them out to over 1,500 tenants across 90 industries. Its top tenants include recession-resistant retailers like Walmart, 7-Eleven, Walgreens, and Dollar Tree.
A couple of of its top tenants struggled with store closures in recent times, nevertheless it surely still maintained a high occupancy rate of greater than 96% over the past three an extended time. It pays its dividends on a monthly basis, and it’s raised its payout 126 times since its IPO in 1994. It currently pays a lovely forward yield of 5%, and its stock looks like a bargain at 16 times last 12 months’s adjusted funds from operations (AFFO) per share.
2. Vici Properties
Vici is a REIT that mainly owns casino and entertainment properties inside the U.S. and Canada. Its top tenants, which it tightly locks into multidecade contracts, include Caesar’s Entertainment, MGM Resorts, Penn Entertainment, and Century Casinos. Additionally it is maintained a formidable occupancy rate of 100% ever since its IPO in 2018.
Vici reduced its dividend in the midst of the height of the pandemic in 2020 and 2021, nevertheless it surely’s raised its payout over the past two years. It pays a high forward yield of 4.9% on a quarterly basis, and its stock still looks low price at 16 times its trailing AFFO.
3. STAG Industrial
STAG Industrial is an REIT that owns 573 industrial properties across 41 states. Its top tenants include Amazon, FedEx, and XPO, and it ended 2023 with a high occupancy rate of 98.2%. Lots of its properties are used as e-commerce success centers, and that foundation could make it a less macro-sensitive play than brick-and-mortar retail or industrial REITs.
STAG pays monthly dividends, and it’s consistently increased its payout every 12 months since its IPO in 2011. It currently pays a forward dividend yield of three.7% and trades at just 18 times last 12 months’s core FFO per share.
4. Digital Realty Trust
Digital Realty Trust is an REIT that leases data centers to over half of the Fortune 500 firms. Its top customers include tech giants like IBM, Oracle, and Meta Platforms. It operates greater than 300 data centers in 50 metro areas the world over, and the secular expansion of the cloud and artificial intelligence (AI) markets should proceed to drive its long-term growth.
Digital Realty’s year-end occupancy rate slipped from 84.7% in 2022 to 81.7% in 2023 as high rates and other macro headwinds throttled the expansion of the cloud market. It trades at 23 times last 12 months’s core FFO per share, which makes it a bit pricer than the other REITs on this list, and it pays a lower forward dividend yield of three.3% on a quarterly basis. It also didn’t raise its dividend last 12 months as its growth cooled off.
But despite those challenges, Digital Realty could still represent an excellent technique to concurrently reap the benefits of the REIT sector’s recovery and the expansion of the knowledge center market.
Must you invest $1,000 in Realty Income immediately?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Idiot’s board of directors. Leo Sun has positions in Amazon, Meta Platforms, Realty Income, and Vici Properties. The Motley Idiot has positions in and recommends Amazon, Digital Realty Trust, FedEx, Meta Platforms, Oracle, Realty Income, Stag Industrial, and Walmart. The Motley Idiot recommends International Business Machines, Vici Properties, and XPO. The Motley Idiot has a disclosure policy.
4 REIT Stocks That Are Screaming Buys in September was originally published by The Motley Idiot