11 Best REIT Stocks to Buy Right Now

Published on October 24, 2022 at 5:18 pm by Vardah Gill in Dividend Stocks, Hedge Funds, News

In this article, we discuss 11 best REIT stocks to buy right now. You can skip our detailed analysis of REITs’ returns over the years and their recent performance, and go directly to read 5 Best REIT Stocks to Buy Right Now.

Real estate investment trusts, or REITs, are increasingly gaining ground among investors in the current volatile economic situation. These companies are a hedge against inflation because of their ability to generate steady cash flows through rental income. In addition to this, these stocks also offer above-average dividend yields to shareholders with constant dividend streams. REITs have seen tremendous growth over the past few decades in the US and currently hold a market capitalization of $1.6 trillion, according to a report by Global X. The report also mentioned that REITs make up 9% of the total commercial property market which is collectively worth over $20 trillion.

REITs were badly hit during the pandemic due to construction delays and reduced operating income. However, the sector gained a foothold next year, delivering strong returns to shareholders. According to a report by Nareit, REITs returned 29% in 2021 through December 1. Another report by the same association mentioned that the FTSE Nareit All Equity REITs Index has outperformed the broader market in 15 of the past 25 years.

Historically, REITs have performed well in periods of high inflation. This performance was attributed to rental contracts and a steady rise in construction projects. Global X referred to research by the Federal Reserve Bank of St. Louis, which showed that REITs outperformed global equities from February 28 2005 to July 31, 2022. As mentioned above, high dividends make REITs one of the most reliable investment options. Especially in inflationary periods, their dividends are rewarding for shareholders because of high yields. Over the past 10 years ending August 31, the dividend growth in the sector has averaged 4.5%, compared with average annual inflation of 2.8%.

With these factors in mind, we have selected some of the best REIT stocks for diverse portfolios that would help generate stable income during these times. Some popular REITs included in the list are Realty Income Corporation (NYSE:O), American Tower Corporation (NYSE:AMT), and Simon Property Group, Inc. (NYSE:SPG).

robert cicchetti / Shutterstock.com

Our Methodology:

For this list, we carefully analyzed stocks from the REIT sector that have sound financial health and solid credentials. These stocks also pay dividends to shareholders and exhibited strong earnings over the years to support these dividends. The stocks are ranked from the lowest yield to the highest, as of October 24.

Best REIT Stocks to Buy Right Now

11. SBA Communications Corporation (NASDAQ:SBAC)

Dividend Yield as of October 24: 1.14%

SBA Communications Corporation (NASDAQ:SBAC) is a Florida-based real estate investment trust company that owns and operates wireless infrastructure in different regions. The company started paying dividends in 2019 and has raised its dividends every year since then, which makes it one of the best dividend stocks on our list. It currently pays a quarterly dividend of C$0.71 per share and has a dividend yield of 1.14%, as of October 24.

In the second quarter of 2022, SBA Communications Corporation (NASDAQ:SBAC) reported growth in its operating cash flow to $372 million, from $263 million during the same period last year. The company also generated a sufficient free cash flow of $319.1 million, up from $218 million in the prior-year quarter. During the quarter, it paid $76.6 million in dividends to shareholders. The company’s current payout ratio stands at 79.8%.

In October, Barclays maintained an Overweight rating on SBA Communications Corporation (NASDAQ:SBAC) with a $286 price target, highlighting the company’s data center earnings. The firm also appreciated the company’s pace of network densification.

At the end of Q2 2022, 36 hedge funds tracked by Insider Monkey reported owning stakes in SBA Communications Corporation (NASDAQ:SBAC), compared with 41 in the previous quarter. These stakes are valued at over $614.5 million. Diamond Hill Capital was the company’s leading stakeholder in Q2.

In addition to some of the best dividend stocks like Realty Income Corporation (NYSE:O), American Tower Corporation (NYSE:AMT), and Simon Property Group, Inc. (NYSE:SPG), SBA Communications Corporation (NASDAQ:SBAC) is also eyed by investors due to its growing dividends.

Baron Funds mentioned SBA Communications Corporation (NASDAQ:SBAC) in its Q2 2022 investor letter. Here is what the firm has to say:

“During the second quarter, we took advantage of the broader market dislocation and indiscriminate selling to increase the Fund’s exposure to wireless tower REITs at what we believe were attractive valuation levels. In June, we re-initiated a position in fellow tower operator, SBA Communications Corp.

We are optimistic on the long-term prospects for wireless cell towers for the following reasons.

Secular Growth Drivers:

Mobile Data Growth: The average smartphone user in the U.S. consumed approximately 3.5 megabytes (“MB”) of data per month in 2016. Today, that same user consumes 20 to 25 MB per month with the proliferation of data intensive applications such as video streaming and gaming. Within five years, industry estimates expect this number to be over 50 MB per month. With the addition of connected smart devices, overall mobile data growth is expected to grow 25% per year over the next five years…” (Click here to see the full text)

10. Equity LifeStyle Properties, Inc. (NYSE:ELS)

Dividend Yield as of October 24: 2.81%

Equity LifeStyle Properties, Inc. (NYSE:ELS) manages the highest-quality portfolio of home resort communities and rental homes in the US. The company recently reported its Q3 earnings, posting funds from operations of $134.4 million, up from $124.5 million during the same period last year. Its revenue of $381 million also showed a 9.7% growth from the prior-year quarter.

Equity LifeStyle Properties, Inc. (NYSE:ELS) is one of the best dividend stocks on our list as the company has been raising its dividends consistently for the past 16 years. Currently, it pays a quarterly dividend of $0.41 per share for a dividend yield of 2.81%, as of October 24. In the past five years, the company has raised its payouts at a CAGR of 11.03%.

In October, RBC Capital maintained its Sector Perform rating on Equity LifeStyle Properties, Inc. (NYSE:ELS) with a $68 price target. The firm mentioned that the company’s FFO growth rate was above its expectations.

As of the close of Q2 2022, 21 hedge funds tracked by Insider Monkey owned stakes in Equity LifeStyle Properties, Inc. (NYSE:ELS), down from 23 a quarter earlier. The collective value of these stakes is over $180 million. Marshall Wace LLP was the company’s leading stakeholder in Q2.

Baron Funds mentioned Equity LifeStyle Properties, Inc. (NYSE:ELS) in its Q2 2022 investor letter. Here is what the firm has to say:

“Equity Lifestyle Properties is part of a niche real estate category that we expect to continue to benefit from favorable demand and supply dynamics. The company is the beneficiary of strong demand from budget-conscious home buyers such as retirees and millennials, and negligible new inventory due to high development barriers. Demand for affordable outdoor vacations (recreational vehicles) also remains strong. Equity Lifestyle Properties has strong long-term cash flow growth prospects and low capital expenditure needs. If the macroeconomic environment worsens, we expect business results to be resilient due to each company’s focus on affordable housing and affordable outdoor vacations.”

9. Prologis, Inc. (NYSE:PLD)

Dividend Yield as of October 24: 3.07%

Prologis, Inc. (NYSE:PLD) is one of the most prominent industrial real estate companies in the world. The company has been raising its dividends consistently for the past eight years, coming through as one of the best dividend stocks in the REIT sector. It currently offers a quarterly dividend of $0.79 per share for a dividend yield of 3.07%, as of October 24.

In the third quarter of 2022, Prologis, Inc. (NYSE:PLD) reported an average occupancy of 97.7%, up from 97.6% in the previous quarter. At the end of the quarter, the company had $636.2 million in cash and cash equivalents, compared with $437.5 million three months ago. Its revenue for the quarter showed a 48.3% year-over-year growth at $1.75 billion.

In October, Morgan Stanley resumed its coverage of Prologis, Inc. (NYSE:PLD) with an Overweight rating and a $120 price target. The firm called PLD one of its Top Picks based on operating upside and cash flow growth.

As per Insider Monkey’s data, the number of hedge funds presenting a bullish stance on Prologis, Inc. (NYSE:PLD) stood at 49 in Q2 2022, jumping from 37 in the previous quarter. The collective value of stakes owned by these hedge funds is over $941.5 million.

Carillon Tower Advisers mentioned Prologis, Inc. (NYSE:PLD) in its Q2 2022 investor letter. Here is what the firm has to say:

“Prologis, Inc. (NYSE:PLD) underperformed due to supply and demand concerns following the announcement that a major online retailer is slowing the rollout of new warehouses. However, we continue to believe that there is overwhelming demand for the company’s assets.”

8. American Tower Corporation (NYSE:AMT)

Dividend Yield as of October 24: 3.13%

American Tower Corporation (NYSE:AMT) operates wireless and broadcast communications infrastructure around the globe. In October, Wells Fargo reiterated its Overweight rating on the stock with a $235 price target, ahead of the company’s Q3 results. The firm also mentioned that wireless demands in the US are expected to remain strong in the next quarter as well.

On September 22, American Tower Corporation (NYSE:AMT) hiked its quarterly dividend by 3% to $1.47 per share. This was the fourth consecutive quarterly dividend raise. Moreover, it has been raising its dividends consistently for the past 11 years, which makes it one of the best dividend stocks to buy now. As of October 24, the stock has a dividend yield of 3.13%.

In Q2 2022, American Tower Corporation (NYSE:AMT) reported a 7% growth in its AFFO attributable to common shareholders to $1.15 billion. The company generated $915.3 million in operating cash flow and $545.2 million in free cash flow during the quarter.

As of the close of Q2 2022, 52 hedge funds tracked by Insider Monkey owned stakes in American Tower Corporation (NYSE:AMT), up from 50 in the previous quarter. These stakes are valued at over $4.37 billion. Charles Akre and Ken Fisher were the company’s most prominent stakeholders in Q2.

Baron Funds mentioned American Tower Corporation (NYSE:AMT) in its Q2 2022 investor letter. Here is what the firm has to say:

“American Tower is a leading global tower company with 220,000 communication sites globally and over 40,000 in the U.S. We added to our position during the market dislocation and as it became increasingly clear that the company would put permanent equity financing in place at better-than-expected terms for its previously announced acquisition of CoreSite (thereby removing the “equity overhang”).

In addition, the company stepped back from a large potential deal in Europe, which would have required significant incremental funding, due to unfavorable contract terms and price. This decision further reinforced our confidence in management’s capital allocation discipline knowing that these were highly sought-after assets.”

7. NexPoint Residential Trust, Inc. (NYSE:NXRT)

Dividend Yield as of October 24: 3.75%

NexPoint Residential Trust, Inc. (NYSE:NXRT) is a Texas-based real estate investment trust company that manages multifamily properties. The company’s cash generation remained stable in Q2 2022, with its operating cash flow of $30 million, compared with $27 million during the same period last year. This growing cash flow shows that the company’s dividends are safe.

NexPoint Residential Trust, Inc. (NYSE:NXRT) holds a six-year track record of consistent dividend growth, which makes it one of the best dividend stocks on our list. Currently, it offers $0.38 per share in quarterly dividends and has a dividend yield of 3.75%, as of October 24.

JMP Securities initiated its coverage on NexPoint Residential Trust, Inc. (NYSE:NXRT) in September with an Outperform rating and a $70 price target. The firm appreciated the company’s net operating income growth and outsized returns.

According to Insider Monkey’s Q2 2022 database, NexPoint Residential Trust, Inc. (NYSE:NXRT) was a part of 7 hedge fund portfolios. The stakes owned by these hedge funds have a total value of over $138 million. Highland Capital Management was the company’s leading stakeholder among these hedge funds.

Baron Funds mentioned NexPoint Residential Trust, Inc. (NYSE:NXRT) in its Q2 2022 investor letter. Here is what the firm has to say:

“Despite strong quarterly results and an encouraging update from management, the shares of NexPoint Residential Trust, Inc., a sunbelt focused apartment REIT, declined in the most recent quarter alongside most other REITs. At its recent price of only $62, we believe the shares are valued at a significant discount to its private market value and remain optimistic about the company’s prospects.” (Click here to view the full text)

6. Welltower Inc. (NYSE:WELL)

Dividend Yield as of October 24: 4.22%

Welltower Inc. (NYSE:WELL) is an Ohio-based REIT that invests in healthcare facilities and infrastructure. At the end of June 2022, the company reported $363.3 million in cash and cash equivalents. Its total assets amounted to $36.5 billion, up from $32.1 billion during the same period last year. The company’s revenue for Q2 showed a 29% year-over-year growth at $1.47 billion.

On August 19, Welltower Inc. (NYSE:WELL) declared a quarterly dividend of $0.61 per share, in line with its previous dividend. This was the company’s 205th consecutive quarterly cash dividend, which places it as one of the best dividend stocks on our list. As of October 24, the stock has a dividend yield of 4.22%. The company can be a good addition to dividend portfolios alongside Realty Income Corporation (NYSE:O), American Tower Corporation (NYSE:AMT), and Simon Property Group, Inc. (NYSE:SPG).

Barclays sees a slight sequential improvement across the healthcare services sector in the third quarter of 2022. In view of this, the firm maintained an Overweight rating on Welltower Inc. (NYSE:WELL) in October with a $78 price target.

At the end of Q2 2022, 26 hedge funds in Insider Monkey’s database were bullish on Welltower Inc. (NYSE:WELL), compared with 25 in the previous quarter. These stakes have a total value of roughly $620 million.

Baron Funds mentioned Welltower Inc. (NYSE:WELL) in its Q2 2022 investor letter. Here is what the firm has to say:

“Health Care REITs (6.4%): Following COVID-19-related operational challenges in 2020 and 2021, health care real estate fundamentals are now improving. Rent increases and occupancy gains are heading in the right direction for the Fund’s investments in senior housing REIT Welltower Inc. (NYSE:WELL).

Muted supply growth in the next two to three years, due to increasing financing and construction costs and supply-chain challenges, should amplify the recovery in fundamentals. The long-term demand outlook is favorable, driven in part by our aging population, which is expected to accelerate in the years ahead.”

Click to continue reading and see 5 Best REIT Stocks to Buy Right Now.

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Published on December 13, 2024 at by Inan Dogan, PhD

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Published on November 16, 2024 at by Insider Monkey Staff

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