Tim Melvin picks out an REIT stock with a billion-dollar market cap that's about to see some big changes to its upside potential thanks to activist investors.
Best REITs to Buy Now
We always hear that stocks are the best way to grow your wealth over the long run. That sentence should be changed to say that stocks are ONE of the best ways to build your wealth. Owning the best REITs could be even better.
From Jan. 1, 1972, through the end of April, the S&P 500, with dividends reinvested, would have earned 10.825% annually. $100 would have grown to about $16,000.
Not too shabby.
According to data from the National Association of Real Estate Investment Trusts, that same $100 placed into REITs that owned commercial real estate would have returned 11.73% annually. That $100 would now be worth $23,726.
That's about $7,700 less shabby than owning stocks.
We think that most investors should own at least some REITs in their long-term portfolios.
And to help you find the right REITs to add, we've put together a list of the best REITs to buy now. Here are the top two – plus, stick around below for a complete primer on real estate investing…
The Best REIT for Industrial Properties
One of the best opportunities in real estate right now is in industrial REITs. These REITs own the warehouses and logistical centers that make commerce possible.
Plymouth Industrial REIT Inc. (NYSE: PLYM) owns 107 properties totaling 23.3 million square feet in industrial markets with access to large pools of skilled blue-collar workers in the main industrial, distribution, and logistics corridors of the United States.
They prefer secondary markets like Indianapolis/South Bend, Jacksonville, Atlanta/Savannah, Cleveland, Columbus, Cincinnati, and Memphis to the larger cities around the United States.
Plymouth is a 20% partner in a joint venture with Madison International Real Estate that plans to buy as much as $430 million in industrial properties around the country.
Plymouth will manage these properties for a 1% fee on total equity invested.
Plymouth has collected almost all of its rents throughout the pandemic and has a portfolio occupancy rate of over 95% right now.
Plymouth is on the hunt for more acquisitions with a focus on the Kansas City market. It made its first purchase there in February and likes the market's future. Kansas City is large distribution and logistical market that is perfect for Plymouth's portfolio.
Plymouth pays a dividend yield of 4.10% right now. We should continue to see substantial rent increases and a rise in property values fuel solid returns thanks to e-commerce and the rebuilding of the U.S. supply chain.
The Best REIT to Buy Now
If you are going to own real estate, why not own properties where your only tenant has never missed a rent payment – and never will? Easterly Government Properties Inc. (NYSE: DEA) rents to Class A commercial properties leased to U.S. government agencies that serve essential U.S. government functions. The rental agreements are made with the U.S. General Services Administration, so there is never a problem collecting rent.
Easterly will work with the agencies to find properties that fit its needs or develop properties that fit the needs of a given situation. The buildings are then leased on long-term leases of at least 10 years, usually with rent escalator clauses.
The REIT owns 79 properties 100% leased to the government, with over eight years remaining on the average lease.
The GSA now leases more properties than it owns, and that's not likely to change. Budget constraints weigh heavily in favor of long-term leasing rather than the purchase of buildings.
Easterly Government Properties ran up last year as it was considered to be the safest yield investment on the planet during the pandemic. As we approach the reopening of the economy, the shares have drifted back down near pre-pandemic levels and are once again an attractive buy.
Easterly Government Properties currently yields 4.10%, and the continual growth of government should provide all the lift these share need to give us very attractive total returns.
What Are Real Estate Investment Trusts (REITs)?
REITs (pronounced "reets") are publicly traded companies that own a portfolio of real estate holdings and properties. The company pools money from its investors to buy property and generates money from the real estate. When investors buy shares in the company, they own a piece of each property the company owns.
REITs are an easy way for investors to diversify their portfolio and gain exposure to the real estate market without directly purchasing individual properties. REIT companies must adhere to strict IRS rules, which include paying a minimum of 90% of their income to investors.
As a result of adhering to strict IRS rules, REIT companies enjoy a tax-exempt status which allows them to finance real estate at lower costs and to pass those savings on to investors.
Most REITs pay dividends quarterly, but some companies choose to pay dividends to their investors monthly.
Finding the best REITs to invest in is an excellent way to earn a passive income by playing the market. The top REIT stocks are subject to change due to market fluctuations but knowing the different types of REITs available and considering market trends can help you make the right investment.
What Kind of REITs Are There?
There are plenty of REIT options for the savvy investor to choose from. First, REITs can be divided into either mortgage or equity funds or a hybrid model:
- Mortgage REITs (or mREITs) provide financing for real estate instead of owning actual properties. They earn income from mortgages or mortgage-backed securities that they originated or bought, and pass on that income to shareholders. When you buy a mortgage REIT, you buy shares similar to how you'd buy shares in a stock or ETF.
- Equity REITs are real estate companies that own or manage properties that produce income, like apartments and office buildings. Equity REITs make money by leasing space to tenants, then they pass on that money (in the form of dividends) to shareholders.
- Hybrid REITs are a combination of mortgage and equity REITs. Buying these lets investors diversify their holdings while mitigating risk.
Both mortgage and equity REITs can be further divided into the following categories:
A retail REIT owns and operates retail properties such as shopping centers, malls, grocery stores, and boutiques.
Office REITs manage and own office buildings which are then leased to businesses and individuals.
Healthcare REITs involve the ownership of hospitals, medical offices, and/or senior and assisted living facilities.
A residential REIT owns and manages residential real estate such as apartment buildings, condominiums, and housing developments.
Are REITs a Good Investment?
REITs are a great way to collect passive income from real estate without the hassle of actual real estate investing. Investors can expect solid returns because REITs are required to share at least 90% of their taxable income to their investors every year.
Investing in an REIT is as simple as buying any other stock. Publicly traded REITs are available on stock exchanges and can be purchased through brokers or on trading platforms. Non-traded REITs can only be purchased by brokers who have access to the trusts.
The best REITs to invest in offer considerable gains to shareholders. REITs boast long-term performance similar to other value stocks and steady dividend yields, which have remained fairly consistent during market fluctuations.
REITs often outperform the S&P 500 Index and, because of their reliability, can serve as a way for investors to hedge their bets against other stock investments in the face of market volatility.
Nearly 145 million Americans have invested in REITs due to their benefits.
As a result of the strict rules to which REITs must adhere, companies are regularly monitored by auditors and analysts—providing a level of transparency that is hard to find in other sectors.
If REIT investing sounds right for you, Money Morning is ready to help. We can help you learn the ins and outs of REIT investing and help you find the best REITs to buy now.
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Tim Melvin picks out a recession-proof REIT that's primed to take off thanks to a "triple tailwind" of ideal conditions.
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Tim Melvin picks out two heavily discounted REIT stocks that are set for a rebound and paying incredible dividends.
Zillow is taking a dive, but that shouldn't turn you away from real estate.
In fact, the best REIT to buy now offers both stability and upside.
And that will be essential as markets get rocky...
The conventional wisdom on dividend stocks usually holds they come in just two polar-opposite categories - amazing and terrible.
The thinking goes that there's an elite group of blue-chip "dividend aristocrats," who up their payouts quarter after quarter for years on end... and then there's everything else. This includes ho-hum stocks that pay a few cents on the dollar while tying up lots of those dollars, and companies sporting insane payout ratios paying unsustainably high dividends.
But when you've been around the block as often as I have, you know it's not that black-and-white. Are there lousy dividend payers? Absolutely. But folks who stick with mainstream thinking on dividends are missing out on a lot.
Because the truth is that outside of the aristocrats, there are plenty of stocks that offer both a great sustainable dividend and long-term appreciation.
And that's the kind of dividend stock I've got picked out for you today.
It's a real estate investment trust (REIT) focusing on one of 2021's hottest sectors. It's up more than 17% for the year, and it's currently paying a dividend more than four times the S&P 500 average. The next payout comes early next month, so move quickly.
Here's the ticker...
The arrival of COVID-19 in 2020 shook up the real estate investment trust (REIT) industry, but two companies weathered the storm and are now paying 8% dividends.
Once it became clear that the Fed and Congress would do everything in their power to keep the economy moving down recovery road, these powerful dividend stocks bounced back even stronger.
Summer is one of the most seasonally weak times of year on the markets; there are rallies here and there, but unless you're onto the right stocks to buy, you can miss out on what profits there are.
Chris Johnson has three strong summertime stocks to buy today.
The surge in home demand is real, and it's going to last a long time.
Of course, it would take a small fortune to win a bid on an investment property right now.
Even if you’ve got a sizeable chunk sitting around, tying it up in one investment may not be attractive either.
Fortunately, the best REITs can give you the benefits of investing in real estate without the high upfront cost or hassle it traditionally takes.
Entertainment stocks, cruise ships, airlines, hotels – all of these have been red-hot over the past few months as part of the “reopening trade.” But the market is flattening, which is a good sign this trade is drying up – all except for one sector.
The last, best reopening play is going to continue to outperform the market for at least the next quarter.
When the coronavirus began to shut the economy down in March, shares of real estate investment trusts (REITs) got hammered.
The shares of many REITs have since recovered, along with the broader stock market.
Many have called this buy-up a "real estate bubble." Truth be told, that's probably not the case right now.
But never hurts to be ready.
There are certainly a few REITs to sell now whether or not a real estate crash is in view.
If there's one industry that's going to benefit the most from a coronavirus vaccine in 2021, its real estate.
All too often, people think they need tens of thousands of dollars to invest in real estate.
That is not true.
Real Estate Investment Trusts (REITs) allow you to invest in a diversified basket of real estate investments for as little as $5-$10.
They trade like stocks, but instead of owning a piece of a company, you own a piece of hundreds or thousands of real estate investments.
Best of all, REITs are required by law to pay 90% of their taxable income to shareholders in the form of dividends.
So, the yields you can generate on these types of investments are generally much higher than market average (1.8% for the S&P 500).