In this article, we will take a look at the 11 best REIT stocks to buy under $10.
The Recent Fed Rate Cut: A Relief for REITs?
The Federal Reserve finally decided to cut rates beginning with a half-percentage point reduction on September 18. Ahead of this major rate cut, real estate investment trusts rebounded from July through mid-September. As reported by The National Association of Real Estate Investment Trusts (Nareit), rate easing cycles are really supportive for the REIT sector. Matthew Sgrizzi, chief investment officer of LaSalle Global Solutions, mentioned the change in the Fed’s policy supporting a positive stance for real estate. However, real estate investment trusts have a long way to go as it could be a multi-year catch-up for them relative to broader equities.
The head of listed real estate at Cohen & Steers, Jason Yablon, considers the recovery of listed real estate investment trusts quicker as compared to the private real estate market. REITs have been a major victim of the high interest rates. As interest rates increased and property values corrected, investors pulled back from real estate investment trusts.
Thus, REITs witnessed their earnings multiple de-rate more than any other equity sector amidst the recent Fed hiking cycle. Hence, it is reasonable to expect a reverse trend with real estate investment trusts outperforming other equity sectors as the rates fall, in the opinion of the portfolio manager at Janus Henderson Investors, Greg Kuhl.
The historical behavior of real estate investment trusts is also important to consider in this regard. With a decline in 10-year Treasury yields, REIT total returns typically start to rise. This indirect relationship between the movements in 10-year Treasury yields and REITs’ performance can be noticed, starting in 2022.
Positive Prospects for Mortgage REITs
Mortgage REITs have underperformed the broader stock market over the past two years of the Fed’s high interest rates. Nareit has also revealed that the outlook for the mortgage REIT sector is especially positive. According to Steve DeLaney at Citizens JMP, the sector to experience the most significant positive impact is the commercial mortgage REIT segment where higher NOI capitalization rates have reduced real estate property valuations and higher rates have led to increased cost of carry for borrowers with floating-rate bridge loans. A combination of factors such as improved sector valuation, less pressure on book value, and relief on portfolio stress factors including interest rate caps on floating rate loans are to benefit the commercial mortgage REITs with the falling interest rates.
With respect to the commercial property sectors, multifamily tends to be the most attractive to mortgage REITs due to the unaffordability of single-family homes and a chronic shortage of supply in the United States. On the contrary, office and mixed-use properties need the most caution and diligence in the prevailing situation. However, issues with office and mixed-use loans could get better with a rise in employers requiring employees to return to the office.
With that being said, let’s move to the 11 best REITs to buy under $10.
Our Methodology:
To compile a list of the 11 best REIT stocks to buy under $10, we used the Yahoo stock screener to acquire a list of real estate investment trusts with the highest market caps and share prices below $10. We then examined the hedge fund sentiment of each stock and picked the most popular ones. Our list is in ascending order of the number of hedge fund holders as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
11 Best REIT Stocks To Buy Under $10
11. Ready Capital Corporation (NYSE:RC)
Share Price as of October 26: $6.87
Number of Hedge Fund Holders: 10
Ready Capital Corporation (NYSE:RC) is a real estate finance company that originates, acquires, finances, and services small- to medium-sized balance commercial loans. Ready Capital’s external manager is Waterfall Asset Management, a global alternative investment manager. The REIT operates through two segments including LMM commercial real estate and Small Business Lending. It is headquartered in New York.
The REIT has a $10.0 billion portfolio of over 6,700 loans diversified across 50 states and Europe with 99% first lien. The firm demonstrates a solid acquisition and integration track record as it has been an active acquiror in the multi-strategy real estate finance sector. It has completed ten transactions since 2014 which includes four public company mergers. Furthermore, the REIT is supported by a successful and proven asset manager with a 19-year investment record.
The firm benefits from the increased opportunity that arises due to the retrenchment of banks from the LMM commercial real estate market. Due to the portfolio management expertise needed to manage these loan assets, competition for LMM commercial real estate loan asset acquisitions is limited. Simultaneously, RC serves as a leading provider of capital to small businesses through 7(a) loans and USDA loans through the Small Business Lending business.
Although Ready Capital Corporation (NYSE:RC) realized a net loss in the second quarter, CEO Thomas Capasse emphasized how the REIT has been focusing on cycling out of underperforming assets and into market-yielding investments. As a part of the firm’s portfolio repositioning efforts, $338 million of assets have been sold and settled thereby generating $57 million in net liquidity, through September 13 as reported by RC. Small Business Lending operations also continue to accelerate with $290 million of 7(a) and USDA loans originated to date in the third quarter.
The REIT’s historical balance sheet reflects that its total assets have grown at a 27% compound annual growth rate from 2017 to June 2024 while the equity has grown nearly 5x since 2017. Ready Capital Corporation (NYSE:RC) has also managed to grow its distributable earnings at an 18% CAGR between 2017 and June 2024.
10. Redwood Trust, Inc. (NYSE:RWT)
Share Price as of October 26: $7.52
Number of Hedge Fund Holders: 11
Redwood Trust, Inc. (NYSE:RWT) is a leading specialty finance company that has been enabling access to housing opportunities for American homebuyers and renters since 1994. The firm invests in mortgages for single-family and rental properties. Additionally, the firm acquires, sells, and securitizes residential loans and offers a steady source of liquidity to the owner-occupied and rental markets.
Redwood Trust, Inc. (NYSE:RWT) has a robust and organically grown investment portfolio which comprises investments sourced organically through the Residential and Business Purpose Mortgage Banking operating businesses, and through other partnerships and third parties. The firm’s products serve some of the largest addressable markets in housing finance. Furthermore, Redwood has demonstrated the ability to capture additional market share amidst a changing regulatory environment.
During the second quarter, the REIT reported GAAP net income of $13.8 million. In Residential Consumer Mortgage Banking, Redwood locked $2.7 billion of loans, up 49% from the first quarter of 2024. In Residential Investor Mortgage Banking, the firm funded $459 million of loans, up 41% from the first quarter of 2024. Regarding the investment portfolio, the firm deployed almost $133 million of capital into internally sourced and third-party investments marking the largest quarter of deployment since the third quarter of 2022.
Reflecting the strength of its balance sheet and its outlook heading into a more accommodative interest rate environment, Redwood Trust announced a third-quarter 2024 regular common stock dividend of $0.17 per share, a 6.25% rise from Q2 2024. This marks the 101st consecutive quarterly common dividend.
Redwood Trust, Inc. (NYSE:RWT) has a strong mission to make quality housing accessible to all American households. The firm boasts a strong position, unique partnerships driving the path to transformative scale, and an extensive total addressable market.
9. Global Net Lease, Inc. (NYSE:GNL)
Share Price as of October 26: $8.04
Number of Hedge Fund Holders: 14
Global Net Lease, Inc. (NYSE:GNL) is an internally managed real estate investment trust. The REIT focuses on acquiring and managing a global portfolio of income-producing net-leased assets across the United States, Western and Northern Europe.
A global presence and a well-diversified portfolio remain a competitive advantage for Global Net Lease, Inc. (NYSE:GNL). This advantage offers GNL the flexibility to focus on attractive opportunities in multiple markets and segments that would potentially contribute long-term value to its shareholders. The firm boasts a top-notch portfolio of premium commercial real estate assets occupied by high-quality investment-grade tenants. The scale is huge with over 1,200 properties in 11 countries globally.
GNL continued its leasing momentum in the second quarter with 97 lease renewals and new leases, representing almost 1.5 million square feet and more than $17 million of straight-line rent. The REIT grew its AFFO per share by 2% and reduced outstanding debt by $251 million in the quarter.
The firm is also progressing well on its 2024 strategic disposition plan as it has closed nearly $569 million of dispositions through Q3 2024. Global Net Lease, Inc. (NYSE:GNL) is geographically diversified with a global presence and a best-in-class portfolio. As of Q2, the stock is held by 14 hedge funds.
8. Paramount Group, Inc. (NYSE:PGRE)
Share Price as of October 26: $5.07
Number of Hedge Fund Holders: 19
Paramount Group, Inc. (NYSE:PGRE) is a fully integrated real estate investment trust that owns, acquires, operates, redevelops, and manages high-quality, Class A office properties situated in select central business district submarkets of San Francisco and New York. The firm is headquartered in New York City.
The REIT has served as the landlord of choice for the biggest names in the financial, legal, professional services, and media industries globally since its founding in 1978. In addition to modern and well-amenitized high-quality properties, PGRE has a high-quality tenant base. Hence, the firm leverages the sought-after location of its assets as well as its ability to attract and retain high-quality tenants.
The firm recorded a net loss attributable to common stockholders of $7.8 million for the second quarter. Core FFO was $43.4 million as compared to $37.1 million in the prior-year period. Additionally, Paramount Group, Inc. (NYSE:PGRE) leased 198,505 square feet out of which its share was 158,592 square feet that were leased at a weighted average initial rent of $74.55 per square foot.
Paramount Group, Inc. (NYSE:PGRE) has an irreplaceable portfolio of well-positioned properties, a reputation for hands-on tenant service, and a highly experienced in-house team of commercial real estate professionals. With a share price of $5.07, the firm ranks among the 11 best REITs to buy under $10.
7. Medical Properties Trust, Inc. (NYSE:MPW)
Share Price as of October 26: $4.62
Number of Hedge Fund Holders: 19
Medical Properties Trust, Inc. (NYSE:MPW) is a real estate investment trust that focuses on long-term real estate investments in community hospitals. The firm owns hospitals in 31 states in the US and eight countries internationally including the United Kingdom, Germany, Finland, Spain, Italy, Switzerland, Portugal, and Colombia.
MPW has grown from its inception in Birmingham, Alabama to being one of the largest global owners of hospital real estate. It is the first and the only company of its kind to focus exclusively on hospital facilities in the United States and globally. The firm serves as the second largest owner of hospital beds worldwide with approximately 42,000 and a US portfolio of $9.2 billion, as of June 30, 2024.
Corporate updates from Medical Properties Trust, Inc. (NYSE:MPW) during and subsequent to the second quarter include the company closing on the sale of five previously leased hospitals to Prime Healthcare and on the sale of a 75% interest in five Utah hospitals leased to CommonSpirit to a new joint venture with an institutional investor. It also completed a £631 million secured financing of 27 U.K. hospitals leased to Circle Health.
Medical Properties Trust, Inc. (NYSE:MPW) remains experienced in unlocking the value of hospital real estate for growth and is preferred by top operators across the world. As of 2024’s second quarter, the stock is held by 19 hedge funds.
6. AGNC Investment Corp. (NASDAQ:AGNC)
Share Price as of October 26: $9.93
Number of Hedge Fund Holders: 19
AGNC Investment Corp. (NASDAQ:AGNC) is an internally managed mortgage REIT founded in 2008. The firm is a leading investor in Agency residential mortgage-backed securities which are guaranteed by a US government-sponsored enterprise. It also invests in other mortgage and mortgage-related securities including non-Agency residential and commercial MBS, credit risk transfer securities, and assets related to the housing, mortgage, or real estate markets not guaranteed by a government agency.
AGNC focuses on Agency MBS which has government support, substantial yield opportunity, and a highly liquid market to offer. Furthermore, the company’s dividend-driven total stock return since its IPO in 2008 has surpassed those of comparable indices and other yield-oriented alternatives. With more than $13 billion of common stock dividends paid since inception, AGNC is a source of substantial monthly dividend income.
In the third quarter of 2024, the REIT generated a strong economic return of 9.3%. This was driven by a strong book value growth and the monthly dividend which has been stable at $0.12 per common share for 55 consecutive months. AGNC is also looking forward to a more positive outlook for Agency MBS considering the Fed’s recent rate cut and a positive direction of the broader economy.
AGNC Investment Corp. (NASDAQ:AGNC) is in a good position to continue offering strong dividend-driven total returns over the long run. The Agency-focused business model has also been resilient against market cycles which deems the REIT durable. As of Q2, the stock is held by 19 hedge funds.
5. DiamondRock Hospitality Company (NYSE:DRH)
Share Price as of October 26: $8.78
Number of Hedge Fund Holders: 21
DiamondRock Hospitality Company (NYSE:DRH) is a real estate investment trust that owns a portfolio of geographically diversified hotels and resorts concentrated in top gateway markets and destination resort locations. The firm has the vision of becoming the premier allocator of capital in the lodging industry.
DRH’s current portfolio encompasses 36 premium hotels and resorts with over 9,700 rooms. The firm maintains one of the most liquid portfolios among peers. DRH has strategically positioned its portfolio to be operated both under leading global brand families and independent boutique hotels in the lifestyle segment. DRH hotels are situated in low-supply markets, with some resort markets having negligible supply growth thereby creating a favorable supply backdrop. Furthermore, the REIT benefits from the strength and resiliency of leisure travel with the intent to spend on leisure travel outperforming overall spending. Business travel is also experiencing continued incremental growth.
For the second quarter, DiamondRock Hospitality Company (NYSE:DRH) posted an adjusted EBITDA of $92.5 million, up 7.8% year-over-year. The REIT’s RevPAR and Total RevPAR were up 2.2% and 4.5% year-over-year, outperforming its peers. Net income was $24.6 million while earnings per diluted share was $0.10.
With a well-positioned portfolio, a strong position among peers, and a favorable secular outlook, the growth potential for DiamondRock Hospitality Company (NYSE:DRH) is bright. In addition to a high-performing and liquid portfolio, the REIT also boasts a flexible balance sheet.
4. Apartment Investment and Management Company (NYSE:AIV)
Share Price as of October 26: $8.70
Number of Hedge Fund Holders: 23
Apartment Investment and Management Company (NYSE:AIV) is a diversified real estate company that primarily focuses on value add and opportunistic investments, targeting the multifamily sector in the United States.
The REIT has a stabilized portfolio that includes 21 stabilized apartment communities with 5,600 apartment homes which are diversified by price point and geography. The firm’s stabilized NOI is supported by apartment communities positioned in markets with forecast compounded annual revenue growth of +2.9% over the next 5 years. The development activity remains robust as well with $1.1 billion of development projects constructed or stabilized on plan since 2020. Furthermore, AIV’s balance sheet is strong with ample liquidity and interest rate protection.
Apartment Investment and Management Company’s (NYSE:AIV) diversified portfolio of apartment communities continued to perform well in the second quarter with NOI up 4.1% year-over-year. Revenue in the quarter was up 4.6% year-over-year due to average monthly revenue per apartment home growing by 4.4% to $2,392 and a 10-basis point increase in Average Daily Occupancy to 96.3%.
Apartment Investment and Management Company (NYSE:AIV) has demonstrated a 30-year history of growth and innovation in the multifamily sector. With a diversified and well-performing portfolio, progressing active development projects, and a strong history in the multifamily sector, AIV is an attractive REIT stock to buy under $10. As of Q2, the stock is held by 23 hedge funds.
3. RLJ Lodging Trust (NYSE:RLJ)
Share Price as of October 26: $9.04
Number of Hedge Fund Holders: 23
RLJ Lodging Trust (NYSE:RLJ) is a self-advised and self-administered Maryland real estate investment trust. The firm owns premium-branded, rooms-oriented, high-margin, focused-service, and compact full-service hotels. The firm’s hotels operate under big global brands including Residence Inn by Marriott, Courtyard by Marriott, AC Hotels, Moxy Hotels, Hilton Garden Inn, Hyatt Place, and Wyndham.
RLJ has a high-quality portfolio with an attractive growth profile. Properties remain geographically diverse and concentrated in major urban areas and dense suburban markets providing multiple demand generators by business, leisure, and other travelers. Simultaneously, these locations provide high barriers to entry due to high construction costs, the density of these markets, and high underlying real estate values.
Despite a challenging environment during the second quarter, RLJ Lodging Trust (NYSE:RLJ) reported a Portfolio Comparable RevPAR of $157.30, up 2.6% year-over-year. It also purchased the 110-room Hotel Teatro in Denver which is expected to generate an estimated 10% yield upon stabilization. Furthermore, the firm announced increase of quarterly dividend to $0.15 per share.
Therefore, RLJ Lodging Trust (NYSE:RLJ) is positioned well to benefit from the upside in urban demand. With a promising urban-centric portfolio, acquisitions, and a future pipeline of conversions, the REIT has multiple channels of growth.
2. Diversified Healthcare Trust (NASDAQ:DHC)
Share Price as of October 26: $3.40
Number of Hedge Fund Holders: 24
Diversified Healthcare Trust (NASDAQ:DHC) focuses on owning high-quality healthcare properties located throughout the United States. The firm owns approximately $7.2 billion of high-quality healthcare properties situated in 36 states and Washington, D.C., as of June 30, 2024. The REIT is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company focused on commercial real estate and related businesses.
DHC is a well-positioned national healthcare REIT. The firm’s institutional quality portfolio is diversified across the healthcare spectrum supporting long-term stable growth. With respect to the Senior Housing Operating Portfolio (SHOP) segment, the opportunity to capitalize on demographic trends is huge with an aging US population and a constrained supply. While the senior living demographic of the over 80 population is expected to grow at a 4.2% CAGR over the next 10 years, inventory growth is expected to remain depressed at 1.2%.
Simultaneously, the Medical Office & Life Science Portfolio leverages industry tailwinds such as rising demand for healthcare services driving the need for medical facilities, increasing chronic disease prevalence, and an aging population driving demand for pharmaceuticals. DHC’s triple net leased senior living communities and wellness centers also consistently deliver strong performance with best-in-class operators.
Another competitive advantage for DHC is being managed by RMR which has a depth of management and experience in the real estate industry. Simultaneously, the REIT believes that the management services provided by RMR cost less relative to what it would have paid if it was self-managed.
Diversified Healthcare Trust (NASDAQ:DHC) benefitted from favorable SHOP industry trends in Q2. The REIT recorded a 27% year-over-year increase in SHOP same property NOI. In the Medical Office and Life Science Portfolio, DHC witnessed a 12% increase in weighted average rental rates on over 100,000 square feet of leasing thereby marking the 4th consecutive quarter of double-digit rent growth.
Thus, Diversified Healthcare Trust (NASDAQ:DHC) serves as one of the leading owners of real estate located across the United States focused on healthcare and life sciences. The firm has a solid portfolio that is all set to take advantage of the demographics and industry conditions.
1. LXP Industrial Trust (NYSE:LXP)
Share Price as of October 26: $9.42
Number of Hedge Fund Holders: 24
LXP Industrial Trust (NYSE:LXP) is an active acquirer, owner, developer, and operator of premium industrial real estate in key US logistics markets with high growth potential. While LXP became a public company in 1993, it has grown over the years and has built an unmatched in-depth investment and financial expertise.
LXP boasts a high-quality portfolio of primarily Class A, single-tenant assets. The firm’s focus on single-tenant, warehouse/distribution properties with strong income and growth characteristics and attractive net lease qualities presents it with a desirable combination of income and growth. Additionally, strong tenant relationships drive high occupancy and tenant retention rates. LXP is pursuing a multi-channel industrial growth strategy which includes development, acquisitions, sale/leaseback transactions, and build-to-suits.
LXP Industrial Trust (NYSE:LXP) recorded a good second quarter as it completed new leases and lease extensions totaling 2.7 million square feet and achieved same-store NOI growth of 5% year-over-year. Net income attributable to common shareholders was $3.8 million. The REIT also invested an aggregate of $34.7 million in development activities.
With decades of experience in commercial real estate and a leading industrial portfolio, LXP Industrial Trust (NYSE:LXP) is a promising real estate investment trust. The firm’s target industrial markets experience strong growth characteristics, demographic trends, and user demand.
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