Investing
REITs Have Been Wrecked This Year: Wall Street Loves 7 'Strong Buy' Stocks With Huge Dividends
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All 11 Global Industry Classification Standard (GICS) sectors are all down this year, with the exception of energy, which is up big. The rise in interest rates has weighed upon the market, but the removal of the Federal Reserve punchbowl is one of the biggest reasons for this year’s horrible stock market performance. Given the terrible print last week for the consumer and producer price indexes, another 75-basis-point increase is likely on the way in early November. While yet another obstacle, at least that increase will get us closer to the ultimate terminal rate for federal funds.
One asset class that tends to survive rate increases and inflationary times is real estate investment trusts (REITs), because as overall costs rise, so do rents and leases that REITs hold. In fact, during the last rate hiking cycle, REITs outperformed the S&P 500 by more than double. In addition, rising rates are forcing some potential homebuyers to remain in rentals, whether it be houses or apartments.
We screened our 24/7 Wall St. REIT research database looking for solid ideas that also pay large and dependable dividends. All the following have been hit very hard and are offering the best entry points for long-term investors looking to add hard assets that pay dependable dividends to their portfolios. While all seven of these top companies we uncovered are rated Buy at major Wall Street firms, 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, and it posted strong first-quarter results with funds from operations surpassing Wall Street expectations.
Shareholders receive a 5.89% distribution. The BTIG Research target price on Getty Realty stock is $30, and the consensus target is $31.21. The stock closed on Tuesday at $28.28.
Gladstone Commercial
Like most in the sector, this stock was hit hard as interest rates charged higher, offering the best entry point in over a year. 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 the IPO 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 occupancy has never dipped below 95.0% since the IPO.
Most importantly for investors, Gladstone has a track record of success, as exhibited by a history of strong distribution yields, a consistently strong occupancy rate and more than 10 years of paying monthly cash distributions.
Gladstone Commercial stock investors receive a 9.63% distribution. B. Riley Securities has a $23 price target, the same as the consensus target. Tuesday’s last trade was reported at $16.38.
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.
Investors receive a 5.60% dividend. Evercore ISI has set its price target at $63. That compares with a $55.43 consensus target for Iron Mountain stock. Tuesday’s close at $47.13 was up close to 4% for the day.
24/7 Wall St.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, Medical Properties Trust 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.
The distribution yield here is 10.68% distribution. The $18 Raymond James price target accompanies a Strong Buy rating. The consensus target is $17.92, and Medical Properties Trust stock closed at $11.06 on Tuesday.
Simon Property
Shares of this leading company have been pounded and are offering the best entry point since last year, and it is a very strong idea for investors looking to play the commercial real estate sector. Simon Property Group Inc. (NYSE: SPG) is a very strong company for investors looking to play the commercial real estate subsector. It invests in real estate markets across the globe, engaging in investment, ownership, management and development of properties. The company primarily invests in regional malls, premium outlets, mills and community/lifestyle centers to create its portfolio.
Through its subsidiary partnership, Simon Property owns or has an interest in about 230 properties in the United States and Asia. The company also has a 28.9% interest in Klepierre, a European real estate investment trust with over 260 shopping centers in 13 countries.
Simon Property Group stock comes with a 7.30% distribution. The price target at Piper Sandler is $123, and the consensus target is $123.81. The shares ended trading on Tuesday at $98.66.
24/7 Wall St.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.
VICI Properties has 23 mixed-use gaming, lodging and entertainment properties in its portfolio, and a subsidiary that owns four championship golf courses. The company also owns roughly 34 acres of undeveloped land in Las Vegas, which it leases to Caesars.
Much of the focus has been 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.
In addition, the company closed a $17.2 billion deal in April to buy out rival gaming REIT MGM Growth Properties, which owns the real estate of 15 casinos and resorts in eight states, including seven properties on the Las Vegas Strip. All of MGM Growth’s properties are operated by MGM Resorts International.
Investors receive a 5.26% distribution. VICI Properties stock has a $39 target at Citigroup. The consensus target is lower at $37.90, and the shares closed on Tuesday at $30.61.
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.
Shareholders receive a 6.20% distribution. The Raymond James price target of $80 is less than the $88.60 consensus target, but W.P. Carey stock ended Tuesday trading at $71.27.
These top stocks have been hit by rising interest rates and large-scale selling across Wall Street this year. They are all leaders in their specific REIT subsectors, offering multiple ways for investors to get steady growth and be paid substantial dependable income. Due to their rate sensitivity, we avoided the super-high-yielding mortgage REITs. Lastly, while they rallied some during the summer move higher, all these stocks have been hit reasonably hard, and are offering the best entry points for investors in well over a year.
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