The implosion of the once invincible Meta Platforms is an eye-opening look into what may become a trend in the technology world. While the Amazon numbers looked strong on the surface, the company missed on revenue and the forward guidance was below expectations. Sure, the company beat earnings guidance, but almost $12 billion of that was the company’s revenue from their investment in electric car company Rivian, or nonoperating income.
The bottom line is the gravy train is coming to an end. The pandemic will end, and so will the punch bowl of liquidity from the Federal Reserve, which will start raising rates in March to try and control the ongoing spiraling inflation that is affecting almost every business and consumer.
So, what’s the answer for 2022? Hard assets like real estate probably will continue to do well, as should commodities like oil and gold. We screened our 24/7 Wall St. research database looking for real estate investment trusts (REITs) that paid big and, most importantly, dependable distributions. We found four that are rated Buy at top Wall Street firms, pay at least a 5% distribution and are in sectors that should do well this year. While all four of the stocks are rated Buy, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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MGM Growth Properties
This company is a triple net lease REIT formed in April 2016 when it was spun out of MGM Resorts. MGM Growth Properties LLC (NYSE: MGP) is one of the leading publicly traded REITs engaged in the acquisition, ownership and leasing of large-scale destination entertainment and leisure resorts with diverse amenities including casino gaming, hotel, convention, dining, entertainment and retail offerings.
The company, together with its joint venture, currently owns a portfolio of properties, consisting of 12 premier destination resorts in Las Vegas and elsewhere across the United States; MGM Northfield Park in Northfield, Ohio; Empire Resort Casino in Yonkers, New York; as well as a retail and entertainment district, The Park, in Las Vegas.
The destination resorts collectively comprised approximately 27,400 hotel rooms, 1.4 million casino square footage, and 2.7 million convention square footage. As a growth-oriented public real estate entity, the company expects its relationship with MGM Resorts and other entertainment providers to position the company attractively for the acquisition of additional properties across the entertainment, hospitality and leisure industries.
Shareholders receive a 5.44% dividend. Deutsche Bank has a $43 price target on MGM Growth Properties stock. The consensus target is $41.33, and the shares closed on Friday at $38.32 apiece.
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Redwood Trust
This is a very solid play for income investors looking for a reasonably safe vehicle. Redwood Trust Inc. (NYSE: RWT) operates as a specialty finance company in the United States. The company operates through three segments.
The Residential Lending segment operates a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale, securitization or transfer to its investment portfolio. This segment also offers derivative financial instruments to manage risks associated with residential loans.
The Business Purpose Lending segment operates a platform that originates and acquires business purpose loans, such as single-family rental and bridge loans for subsequent securitization or transfer into its investment portfolio.
The Third-Party Investments segment invests in residential mortgage-backed securities issued by third parties, as well as in K-Series multifamily loan securitizations and SLST reperforming loan securitizations. This segment also offers servicer advance and other residential and multifamily credit investments.
The company qualifies as a REIT for federal income tax purposes, and it intends to distribute at least 90% of its taxable income as dividends to shareholders.
Shareholders receive a 5.85% distribution. The Raymond James price target of $16.50 accompanies a Strong Buy rating. The consensus target for Redwood Trust stock is $15.41, and Friday’s closing trade was at $11.81 a share.
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VICI Properties
This is the top pick across Wall Street in the net lease group, and it is an ideal stock for investors who are more conservative and looking for gaming exposure. VICI Properties Inc. (NYSE: VICI | VICI Price Prediction) is a triple net lease REIT that was spun out of Caesars Entertainment post-bankruptcy.
The company has 23 mixed-use gaming, lodging and entertainment properties in its portfolio, and a subsidiary that owns four championship golf courses. VICI also owns roughly 34 acres of undeveloped land in Las Vegas, which it leases to Caesars.
Much of the focus this year was on VICI’s recent deal to acquire the real estate of the Venetian Resort in Las Vegas, with Apollo as a new tenant. Looking ahead, many on Wall Street are very positive on VICI’s embedded growth pipeline with Caesars Entertainment, including a put/call on the Centaur properties in Indiana (starting this month) and a right of first refusal on a strip asset sale for Caesars, which could occur soon after a full earnings before interest, taxes, depreciation, amortization and restructuring or rent costs recovery.
VICI Properties stock investors receive a 5.01% distribution. Berenberg Bank recently started coverage and set a price target of $35, while the consensus target is $36.01. Shares closed on Friday at $28.14.
W.P. Carey
This is a large net lease REIT with an incredible distribution for income investors. W.P. Carey Inc. (NYSE: WPC) ranks among the largest net lease REITs, with an enterprise value of approximately $18 billion and a diversified portfolio of operationally critical commercial real estate that includes 1,215 net lease properties covering approximately 142 million square feet, as of September 30, 2020.
For nearly five decades, the company has invested in high-quality single-tenant industrial, warehouse, office and retail properties subject to long-term leases with built-in rent escalators. Its portfolio is located primarily in the United States and northern and western Europe, and it is well diversified by tenant, property type, geographic location and tenant industry.
Net lease REITs generally rent properties with long-term leases (10 to 25 years) to high credit-quality tenants, usually in the retail and restaurant spaces. “Net lease” refers to the triple-net lease structure, whereby tenants pay all expenses related to property management: property taxes, insurance and maintenance.
Investors receive a 5.49% distribution. The $90 Wells Fargo price target compares to an $86.38 consensus target. W.P. Carey stock closed at $82.99 on Friday.
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Two top companies with varied business silos and two that focus on the gaming industry, which is seeing a big resurgence due to legalized sports gambling being approved in more and more states. While a sharp spike in rates could be detrimental to the sector, the Federal Reserve slowly raising them over the next two years likely will not provide any headwinds for these top ideas. Remember that REIT distributions can contain return of principal.
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