Analysts say these stocks are among the best high-yield REITs to buy.
Buying physical property can be difficult and costly for the average person. That’s why many people turn to funds that offer easier investments in the real estate market and can often beat the broader market. The Real Estate Select Sector SPDR Fund (ticker: XLRE) has roughly tripled the return of the S&P 500 over the past 12 months, for example. Real estate investment trusts, or REITs, are publicly traded companies that invest in real estate. By law, REITs must pay out at least 90% of their taxable income to shareholders, which means many of the best REITs have extremely high dividend yields. Here are eight of Bank of America’s top REITs to buy and hold for the long term that have at least 3.5% dividends.
Simon Property Group Inc. (SPG)
Simon Property is a retail REIT that specializes in regional malls, outlet centers, and community and lifestyle centers. Jeffrey Spector, an analyst at Bank of America, says Simon is coming off a strong fourth quarter and has issued conservative 2022 guidance that sets a low bar for the REIT to clear. Spector says Simon is a “high-quality value REIT,” and its core business fundamentals show signs of improvement. Tenant sales per square foot and occupancy rates are rising, suggesting a significant rebound. The REIT has a 5.2% yield. Bank of America has a “buy” rating and a $175 price target for SPG stock, which closed at $127.88 on April 14.
Realty Income Corp. (O)
Realty Income is a retail REIT that specializes in U.S. single-tenant buildings. In February, Realty Income reported a fourth-quarter earnings beat and reiterated its previous 2022 guidance. Realty Income expanded into the casino industry in the fourth quarter of 2021, when it agreed to purchase the Boston Encore casino from Wynn Resorts Ltd. (WYNN) for $1.7 billion. Spector says the casino deal is an excellent example of Realty’s “widening the aperture” strategy, which he says will expand its growth opportunities. Realty pays a 4.1% dividend. Bank of America has a “buy” rating and an $80 price target for O stock, which closed at $72.61 on April 14.
VICI Properties Inc. (VICI)
VICI Properties is a specialized REIT that owns gaming, hospitality and entertainment properties, including Caesars Palace in Las Vegas. VICI has been aggressively acquiring major properties, including a $4 billion acquisition of the Venetian Resort Las Vegas in February and a pending $17.2 billion acquisition of MGM Growth Properties LLC (MGP). Analyst Shaun Kelley is bullish on VICI and says management believes the REIT is “on the cusp” of an investment-grade credit rating, which could significantly lower the cost of its debt. VICI pays a 5% dividend. Bank of America has a “buy” rating and a $32 price target for VICI stock, which closed at $29.09 on April 14.
Regency Centers Corp. (REG)
Regency Centers is a retail REIT that specializes in shopping centers. Analyst Craig Schmidt says Regency finished 2021 strong with solid fourth-quarter numbers, but its 2022 guidance missed expectations due to one-time variances in collections of prior-year reserves and higher general and administrative costs. Schmidt says the guidance is likely on the conservative side, creating the opportunity for earnings beats and guidance hikes in 2022. He says Regency has plenty of growth opportunities from transactions, redevelopments and future developments. Regency pays a 3.5% dividend. Bank of America has a “buy” rating and an $89 price target for REG stock, which closed at $70.58 on April 14.
Highwoods Properties Inc. (HIW)
Highwoods Properties is an office REIT that specializes in office buildings primarily located in Pittsburgh and the U.S. Southeast. Analyst James Feldman says office leasing volumes are trending in the right direction, and variable income sources such as parking, building services and signage have bounced back quicker than anticipated. Feldman is anticipating most Highwoods tenants will reopen offices in the first half of 2022, but Southeast region tenants may beat the rest of the country back to the office. Highwoods pays a 4.6% dividend. Bank of America has a “buy” rating and a $51 price target for HIW stock, which closed at $43.67 on April 14.
Brixmor Property Group Inc. (BRX)
Brixmor Property is a retail REIT that specializes in U.S. open-air shopping centers. Schmidt says Brixmor made impressive progress on both its internal and external growth in the fourth quarter of 2021. Brixmor also executed 2.1 million square feet of leases in the fourth quarter, generating a 14.5% rent spread on renewals and a 41.7% spread on new leases. Brixmor is calling for between 2% and 4% same-store net operating income growth this year. The REIT pays a 3.7% dividend. Bank of America has a “buy” rating and a $28.50 price target for BRX stock, which closed at $26.01 on April 14.
Spirit Realty Capital Inc. (SRC)
Spirit Realty Capital is a retail REIT that specializes in single-tenant, operationally essential properties. Analyst Joshua Dennerlein says Spirit’s balance sheet is solid following a January 2022 equity offering, and the company’s management plans for significant external growth this year. Spirit Realty’s 2022 guidance calls for between $1.3 billion and $1.5 billion in capital deployment and only about $100 million in dispositions. Dennerlein is bullish on the stock given its potential for increasing capital deployment. Spirit pays a 5.6% dividend. Bank of America has a “buy” rating and a $51 price target for SRC stock, which closed at $46.01 on April 14.
EPR Properties (EPR)
EPR Properties is a specialized REIT that owns experiential properties, including movie theaters, waterparks and ski resorts. Popular meme stock AMC Entertainment Holdings Inc. (AMC) is EPR’s largest tenant. Dennerlein says EPR’s 2022 guidance topped his expectations, including between $4.30 and $4.50 in funds from operations, a popular measure of a REIT’s cash generation per share. EPR also recently raised its monthly dividend by 10%, bringing its new yield up to 6.2% and giving EPR the highest dividend yield on this list. Bank of America has a “buy” rating and a $52 price target for EPR stock, which closed at $53.44 on April 14.
8 best high-yield REITs to buy:
— Simon Property Group Inc. (SPG)
— Realty Income Corp. (O)
— VICI Properties Inc. (VICI)
— Regency Centers Corp. (REG)
— Highwoods Properties Inc. (HIW)
— Brixmor Property Group Inc. (BRX)
— Spirit Realty Capital Inc. (SRC)
— EPR Properties (EPR)
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8 Best High-Yield REITs to Buy originally appeared on usnews.com
Update 04/18/22: This story was published at an earlier date and has been updated with new information.
