These real estate stocks are up this year and offering strong yields.
An often-quoted line in investing, sometimes attributed to Mark Twain, goes something like this: “Buy land, they’re not making any more of it.” While that’s true, the reality is that most individual investors can’t become real estate speculators easily because land can be pretty darn expensive, and it isn’t very easy to sell quickly if you need the cash for something else. However, real estate investment trusts, or REITs, offer even small-time investors the opportunity to play property trends, either for added profit potential or as a hedge against a downturn. That could be useful in the current macroeconomic environment, as the economy struggles to recover from more than two years of a pandemic and that recovery is threatened by rising inflation, a cycle of interest rate hikes and skyrocketing gas prices exacerbated by geopolitical conflict. The following seven REITs have posted at least a small gain year to date despite a downward market, and all have dividend yields of at least 2.3% — significantly higher than the 1.4% that you’ll find on average among S&P 500 index components.
Boston Properties Inc. (ticker: BXP)
Boston Properties is the largest publicly held company that owns and develops Class A office properties in the United States. As you may have guessed, this is the top tier of commercial real estate that typically consists of state-of-the-art high-rise buildings that are concentrated in major metro areas where rents are high thanks to constant demand. As the name implies, BXP owns key properties in Boston but also in other large markets, including Los Angeles, New York, San Francisco and Washington, D.C. The company’s portfolio totals more than 50 million square feet across roughly 200 properties, with top-tier clients that will hang tough and keep paying rent even in a brief economic downturn. That adds up to reliable returns for investors.
Dividend yield: 3.2%
CyrusOne Inc. (CONE)
CyrusOne is a globally focused REIT with a specialty in providing space to house high-tech data centers. After all, while it’s all the rage for businesses to offload their servers to the cloud, the bottom line is that the hardware still has to live somewhere — and CONE is one of the companies that helps support all that physical server space. Through more than 50 high-performance data centers worldwide, it serves about 1,000 individual customers, including some of the top firms in the world. While there are certainly some kinds of real estate that could be disrupted in a downturn, one thing that won’t be going away anytime soon is demand for data and internet infrastructure, so CONE is a pretty safe bet in any environment.
Dividend yield: 2.3%
LXP Industrial Trust (LXP)
LXP, formerly Lexington Realty Trust, owns a portfolio of real estate assets consisting primarily of equity investments in single-tenant “net-leased” industrial properties, predominantly triple-net leased, across the United States. Triple-net leases mean that the tenant has to take care of the upkeep and maintenance costs, including taxes and insurance, and just passes on the cash to LXP for using the property. That’s a tremendous place to be, because it means an efficient operation with big margins — and thus, reliable dividend payments to LXP shareholders. With more than 120 properties that offer up 56 million square feet of real estate, this is a big-time operator. And with an average lease term of seven years, there’s little chance any short-term disruptions will get in the way of its success.
Dividend yield: 3.1%
Rayonier Inc. (RYN)
Perhaps one of the strangest real estate stocks on this list, Rayonier doesn’t actually own any buildings. Instead, it’s a leading timberland owner that just happens to be structured as a real estate investment trust. Rayonier owns or leases nearly 3 million acres of timberlands located in the U.S. South and Pacific Northwest as well as New Zealand. With constant inflation pushing up the price of raw materials, lumber is a pretty good business to be in lately. But the underlying value of all that land is also a great hedge against economic downturns, as there’s proven value in the property that doesn’t rely on customers or tenants. When it comes to stocks that have a store of value, there’s perhaps no better example among the REITs on this list than RYN.
Dividend yield: 2.6%
Ventas Inc. (VTR)
Ventas is a health care-focused real estate company that offers space to doctors’ offices, medical research facilities and institutions like hospitals or senior living communities. It has a massive portfolio of more than 1,200 properties that allow it to tap into one of the most reliable trends out there — the constant demand for care as people get old or sick. Late last year, VTR just closed on its acquisition of New Senior Investment Group, a $2.3 billion elder care powerhouse, and that will only increase its dominant footprint going forward. The reliable cash from Ventas tenants helps fuel a generous 45-cent quarterly dividend that is likely to grow going forward, regardless of the macroeconomic picture.
Dividend yield: 3.1%
Vornado Realty Trust (VNO)
Similar to Boston Properties, Vornado’s real estate portfolio is also focused on top-tier office space. And primarily, VNO is concentrated in the nation’s premier markets, including New York City, Chicago and San Francisco. It has a very important sustainability mission for its office space, too, managing over 23 million square feet of LEED-certified buildings and some of its properties receiving various awards for their “green” format. Vornado has been publicly traded for more than 50 years and has a rich history of returning cash to its investors across markets both good and bad, and its low-carbon approach to offices should serve it well for many years to come.
Dividend yield: 4.6%
Welltower Inc. (WELL)
Welltower is based in Toledo, Ohio, and is among the largest medical real estate companies out there. It is focused on senior housing operators, hospital systems and other similar properties. And unlike some of the other picks on this list, it is international, with operations in Canada and the U.K. as well as in America. This allows for a diverse portfolio of medical properties that should continue to deliver strong results, regardless of the ups and downs on Wall Street. With the cost of care always on the rise and constant demand for treatment in both good and bad economic environments, WELL is a nice low-risk REIT to consider if you’re looking for a defensive play in 2022.
Dividend yield: 2.8%
The seven best REITs to buy for a recession:
— Boston Properties Inc. (BXP)
— CyrusOne Inc. (CONE)
— LXP Industrial Trust (LXP)
— Rayonier Inc. (RYN)
— Ventas Inc. (VTR)
— Vornado Realty Trust (VNO)
— Welltower Inc. (WELL)
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