These real estate stocks offer dividend yields from 2.2% to 13.9%.
Recessionary fears are currently running high in the U.S. June’s year-over-year consumer price index readings came in blisteringly hot at 9.1%, surpassing Wall Street consensus estimates of 8.8%. The yield curve inversion between the two-year Treasury bond and the 10-year steepened. An inverted yield curve is often interpreted by economists as a sign of an impending recession, with inversions preceding the 2001, 2008 and 2020 recessions. All eyes are now on upcoming gross domestic product data. With this in mind, investors looking for real assets that may outperform stocks and bonds can buy shares of real estate investment trusts, or REITs. REITs often pay high distribution yields, which can cushion portfolios in a sideways or bear market. Here are seven REITs to buy in case of a recession.
Annaly Capital Management Inc. (ticker: NLY)
With a trailing-12-month (TTM) price-earnings, or P/E, ratio of just 3.6, NLY is a REIT that looks to be trading in value territory. In comparison, the popular Vanguard Real Estate ETF (VNQ), a market-cap-weighted index of 170 U.S. REITs has an average P/E ratio of 27.5. Most of NLY’s book of business is centered around its agency segment, which primarily deals in mortgage-backed securities. NLY is expected to report earnings after market close on July 27 for the quarter ended June 20. The consensus earnings-per-share estimate is for 97 cents and the revenue estimate is $1.53 billion. What’s notable right now is NLY’s distribution payout of 88 cents a share annually.
Dividend yield (TTM): 13.9%.
New Residential Investment Corp. (NRZ)
NRZ is another REIT that looks to be trading in value territory with a trailing P/E ratio of 4.45. Like NLY, NRZ primarily deals in mortgage-related assets, with segments operating in origination, servicing, residential securities, properties and loans, consumer loans, and mortgage loans receivables. Recently, NRZ said it would be operating as an internally managed REIT, which management estimated would produce $60 million to $65 million in cost savings annually. Along with this change comes a rebranding of the company’s name to Rithm Capital, and a new ticker: RITM. The change is slated to occur on or about Aug. 1. NRZ last paid an annualized distribution of $1 per share.
Dividend yield (TTM): 10%.
Sun Communities Inc. (SUI)
Unlike most REITs, SUI doesn’t operate a traditional portfolio of commercial, residential or even industrial properties. Instead, SUI acts as an owner and operator of manufactured housing communities, which encompasses recreational vehicle and marina resorts. Currently, SUI’s portfolio consists of roughly 283 housing communities, 192 RV parks, 130 marinas, and 41 RV holiday sites across the U.S., U.K. and Canada. Over the years, SUI has enjoyed strong growth through its spree of property acquisitions and a development pipeline that targets multiple new projects every year. Year-over-year quarterly revenue growth currently stands at 23.8%, with the company recording trailing-12-month revenue per share of $20.54.
Dividend yield (TTM): 2.2%.
American Tower Corp. (AMT)
As an industrial REIT, AMT manages a portfolio of properties primarily housing the cellular towers critical to wireless communications networks. Currently, AMT operates over 220,000 cell tower sites globally across the U.S., Central and South America, and India. The REIT has benefited strongly from tail winds stemming from the 5G boom in recent years. Year-over-year quarterly earnings and revenue growth for AMT stand at 10.3% and 23.2%, respectively, which is highly impressive for the REIT industry. Investors will like AMT for its low beta, or relatively low risk profile. With a beta of 0.46, AMT is less than half as volatile as the S&P 500 index. AMT last paid an annualized distribution of $5.53 per share.
Dividend yield (TTM): 2.2%.
Boston Properties Inc. (BXP)
BXP is a more traditional REIT, managing a portfolio of 200 Class A office properties in Boston, New York, San Francisco and Washington. Class A office properties are the most prestigious buildings in an area, commanding significant size and able to charge above-average rents. Think of the latest high-rises, with advanced elevators, HVAC and state-of-the-art technological capabilities. These properties are often leased by high-profile tenants like tech companies, investment banks and asset management firms who have to impress employees and clients alike. Despite the growing preference for remote work, BXP still recorded strong year-on-year quarterly revenue and earnings growth of 6.7% and 42.2%, respectively. BXP last paid an annualized distribution of $3.92 per share.
Dividend yield (TTM): 4.4%.
Prologis Inc. (PLD)
Investors looking to play both the REIT sector and the supply chain industry can buy shares of PLD. As a global logistics REIT, PLD is one of the biggest owners of industrial property worldwide, with over 4,675 holdings totaling over 1 billion square feet of leased space. Over the last decade, PLD has derived strong growth from the surge in e-commerce as a supplier of warehouse and distribution center space. The tail wind and strong demand for e-commerce and third-party logistics providers has fueled PLD’s low vacancy rate and ability to increase rents for its tenants. The last payout was an annualized $2.84 per share.
Dividend yield (TTM): 2.3%.
Ventas Inc. (VTR)
Like PLD, VTR also combines the benefit of owning REITs with exposure to another stock market sector. In this case, its health care, as VTR owns and operates a portfolio of 1,200 senior housing and health care properties, which the REIT either leases to tenants or operates via independent third-party managers. An aging U.S. population, along with growing senior health care needs, is likely to drive further demand for health care space and thus VTR’s portfolio of properties. Although the COVID-19 pandemic severely affected senior and assisted-living housing, VTR’s occupancy had recovered to an average of 83% by the end of the first-quarter 2022, with its balance sheet stabilizing significantly. The company last paid an annualized dividend of $1.80 per share.
Dividend yield (TTM): 3.5%.
7 best REITs to buy for a recession:
— Annaly Capital Management Inc. (NLY)
— New Residential Investment Corp. (NRZ)
— Sun Communities Inc. (SUI)
— American Tower Corp. (AMT)
— Boston Properties Inc. (BXP)
— Prologis Inc. (PLD)
— Ventas Inc. (VTR)
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7 Best REITs to Buy for a Recession originally appeared on usnews.com
Update 07/20/22: This story was published at an earlier date and has been updated with new information.
