An adage among real estate investors basically says that you cannot build any more land. While you can always build higher, you still need the land. One of the best assets that most investors are underweighted on is real estate. Those who own a home are technically real estate investors, but home ownership does not produce any income, unless you have rental homes, which can be very capital intensive, not to mention time-consuming.

The inflation conditions this year are the worst since the early 1980s, and there is no reason to expect things will improve any time soon. In fact, according to the National Federation of Independent Business, about 40% of U.S. small businesses intend to raise prices by 10% or more this year. Add in spiraling food and gasoline prices, and the picture for the rest of 2022 looks increasingly grim.

Many investors are concerned that real estate investment trusts (REITs) will get hit hard in a rising interest rate environment, which has begun in earnest as the Federal Reserve raised the federal funds rate by 50 basis points, and similar or even bigger hikes are expected in June and July, as well as the rest of the year.

The reality is REITs have performed well. In a recent publication, the National Association of Real Estate Investment Trusts had this to say:

Historically, REITs have performed well during periods of rising long-term interest rates with average four-quarter return in periods with rising rates of 16.55% compared to 10.68% in non-rising rate periods from the first quarter of 1992 to the fourth quarter of 2021. Additionally, REITs outperformed the S&P 500 in half of the periods when Treasury yields were rising. The positive association that has historically been observed between periods of rising rates and REIT returns is consistent with an improvement in the underlying fundamentals.

We screened our 24/7 Wall St. REIT research universe and found 10 top companies that are all Buy-rated on Wall Street and pay very secure and big dividends. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Getty Realty

Despite climate change concerns, people still need gasoline for their cars, trucks and vans, and gas stations still provide that basic need. Getty Realty Corp. (NYSE: GTY) is a publicly traded net lease REIT specializing in the acquisition, financing and development of convenience, automotive and other single-tenant retail real estate. As of March 31, 2022, the company’s portfolio included 1,014 properties in 38 states and the District of Columbia.

With big footprints in both Texas and California, the company serves some of the most populated regions of the country. Last week, it posted strong first-quarter results with funds from operations that surpassed Wall Street expectations.

Shareholders receive a 6.15% distribution. Baird’s $34 target price compares with a $33.75 consensus target and the most recent close at $26.67 a share.

Gladstone Commercial

This stock has been hit hard as interest rates charged higher and is offering the best entry point since last November. Gladstone Commercial Corp. (NASDAQ: GOOD) is focused on acquiring, owning and operating net leased industrial and office properties across the United States.
As of June 30, 2021, Gladstone owns a diversified portfolio of 121 office and industrial properties located in 27 states and leased to 106 tenants. The company has grown the portfolio in a consistent, disciplined manner at a rate of 18% per year since going public in 2003. It matches long-term leased properties with long-term debt to lock in the spread to create a durable, stable cash flow stream to fund monthly distributions to shareholders. Current occupancy stands at 96.5%, and that occupancy has never dipped below 95.0% since 2003.

Most importantly for investors, Gladstone has a track record of success, as exhibited by a history of strong distribution yields, consistent occupancy and more than 10 years of paying continuous monthly cash distributions.

Investors in Gladstone Commercial stock receive a 7.17% distribution. Aegis has a Wall Street high $26 price target, which may be headed higher soon. The consensus target is $25, and the stock closed on Tuesday at $20.99 a share.

Iron Mountain

Many businesses turn to this company to store data or documents. Iron Mountain Inc. (NYSE: IRM), founded in 1951, is the global leader in secure storage and information management services. Trusted by more than 225,000 organizations around the world, and with a real estate network of more than 90 million square feet across approximately 1,450 facilities in approximately 50 countries, Iron Mountain stores and protects billions of valued assets, including critical business information, highly sensitive data and cultural and historical artifacts.

Its solutions include secure records storage, information management, digital transformation and secure destruction, as well as data centers, cloud services and art storage and logistics. Iron Mountain helps customers lower cost and risk, comply with regulations, recover from disaster and enable a more digital way of working.

Shareholders receive a 4.70% dividend. Stifel recently raised its $52 price target on Iron Mountain stock to $60. The consensus target is $53, and Tuesday’s closing print was $52.57, after a one-day pop of almost 4%.

Medical Properties Trust

This stock may offer investors the best value at current price levels. Medical Properties Trust Inc. (NYSE: MPW) acquires, develops and invests in health care facilities and leases health care facilities to health care operating companies and providers. The company also provides mortgage loans to health care operators, as well as working capital and other term loans to its tenants/borrowers.

With a growing portfolio and a versatile business model, the company continues to rank high across Wall Street. The analysts noted that the company’s acute care hospitals rent coverage increased nicely and the company attributed the increase to better cost controls and higher patient admissions.

Shareholders receive a 6.18% distribution. The $26 price target at Credit Suisse is a Wall Street high. The consensus target on Medical Properties Trust stock is $23.21, and shares closed over 4% higher on Tuesday to $18.78.

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 5.09% dividend. The $43 Deutsche Bank price target is higher than the $41.64 consensus target. MGM Growth Properties stock closed at $40.80 on Tuesday.

Postal Realty Trust

This is among the safest bets of all for investors. Postal Realty Trust Inc. (NYSE: PSTL) is an internally managed REIT that owns and manages over 1,400 properties leased primarily to the U.S. Postal Service, ranging from last-mile post offices to larger industrial facilities. The company believes it is one of the largest owners and managers of properties leased to the USPS.

Despite the problems the postal service has had over the years, the bottom line for investors is that being government owned guarantees timely payment of rent, the offices do not move and Postal Realty Trust is not required to keep onsite management at the various facilities.

Shareholders receive a 5.58% distribution. Aegis has set a $23 price target, and the consensus target is $21.13. The stock closed on Tuesday at $16.49.

Realty Income

This is an ideal stock for growth and income investors looking for a safer, inflation-busting idea for 2022. Realty Income Corp. (NYSE: O) is an S&P 500 company dedicated to providing stockholders with dependable monthly income.

This REIT’s monthly distributions are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with commercial tenants. To date, the company has declared 608 consecutive common stock monthly dividends throughout its 52-year operating history and increased the dividend 109 times since its public listing in 1994. It is a top real estate member of the S&P 500 Dividend Aristocrats index.

Investors are paid a very solid 4.38% distribution. The Realty Income stock price target at Goldman Sachs is $87. The $77.63 consensus target is closer to the $67.67 per share close on Tuesday.

STORE Capital

This company is focused on very popular retail outlets and is offering an outstanding solid entry point. STORE Capital Corp. (NYSE: STOR) is an internally managed net-lease REIT that is the leader in the acquisition, investment and management of single-tenant operational real estate, which is its target market.

This is one of the largest and fastest-growing net-lease REITs and owns a large, well-diversified portfolio that consists of investments in more than 2,500 property locations across the United States, most of which are profit centers.
STORE Capital announced last week that it has entered into $600 million of unsecured long-term debt financing. This debt transaction consisted of $400 million five-year and $200 million seven-year floating rate loans.

The loans were effectively converted to a weighted average fixed rate of 3.68% for the term of the loans through the use of interest rate swaps. The company is using the proceeds of the transaction primarily to pay down amounts outstanding on its unsecured revolving credit facility and to prepay, without penalty, $134.5 million of STORE Master Funding Series 2014-1, Class A-2 notes, which bore a coupon rate of 5.0%, resulting in an annual interest expense savings of $1.8 million.

Shareholders receive a 5.52% distribution. Wells Fargo’s $38 target price compares with a $34.33 consensus target and the most recent close at $27.91.

VICI Properties

This is the top pick across Wall Street in the net lease group, and it is an ideal pick for investors who are more conservative and looking for gaming exposure. VICI Properties Inc. (NYSE: VICI) 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 in January) 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.

Investors receive a 4.81% distribution. The BofA Securities price target is $36. The consensus target is $35.13, and VICI Properties stock closed over 3% higher on Tuesday at $29.93.

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.

W.P. Carey stock comes with a 5.39% distribution. Raymond James has set a $90 price target, while the consensus target is $88.33 and the shares closed at $78.51 on Tuesday.

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Almost all these top companies have been hit by the parabolic move higher in interest rates, along with the rest of the market. As history tells us that these top REITs should perform well over the long haul, even as the Federal Reserve continues to raise interest rates. Note that REIT distributions may contain return of principal.

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