These are nine of the best REITs to buy now.
Not every investor has the time, energy or capital to get a rental property going. Between mortgage payments, managing tenants, maintenance and repairs, and property taxes, being a landlord can quickly balloon into a second job as opposed to a truly passive income stream. Fortunately, there is an alternative via real estate investment trusts, or REITs. REITs are publicly traded companies that act as an investment fund for real estate ventures. Often, REITs will manage a portfolio of properties and collect lease revenue. By law, REITs are required to pay at least 90% of taxable income to unit holders to avoid corporate income taxes. As a result, many REITs pay high distributions, often on a monthly basis. This can make them a good alternative to dividend stocks or corporate bonds for investors seeking real estate exposure and consistent income. Here are the nine best REITs to buy for 2023.
Prologis Inc. (ticker: PLD)
A quirk of REITs is their ability to interface with different stock market sectors depending on the industry their tenants operate in. An example of a REIT with retail sector connections is Prologis. With a market capitalization of more than $100 billion, Prologis plays a huge role in the global supply chain industry. This logistics giant currently owns and operates around 984 million square feet of facilities involved in shipping and order fulfillment. Thanks to the strong growth in e-commerce and shipping from tenants like Amazon.com Inc. (AMZN) and FedEx Corp. (FDX), Prologis has seen strong, sustained growth. With distributions reinvested, investing in Prologis since January 1998 to present would have netted an annualized return of 10.8%. The REIT currently pays a yield of 2.8%.
American Tower Corp. (AMT)
Cell towers and data centers that power communications networks are some of the most vital pieces of infrastructure in the U.S. Telecommunication providers rely on these assets to provide their services. When it comes to owning a share of these properties and benefiting from their lease income, no REIT does it better than American Tower Corp. This REIT currently holds a portfolio of 220,000 telecommunications sites across the world. Recently, American Tower made forays into the 5G space and acquired CoreSite Realty in November 2021, which significantly bolstered its data center portfolio. American Tower currently pays a yield of 3%.
Equinix Inc. (EQIX)
At more than $660 per share as of Dec. 21, shares of Equinix don’t come cheap. The REIT’s elevated share price is a result of its explosive growth. As one of the world’s largest owners of data center properties, Equinix benefited significantly from the innovation and investment in the cloud computing industry. As COVID-19 sent consumers indoors, internet usage surged, causing demand for Equinix’s data services to grow even faster. Recently, the REIT announced an investment of $160 million into a new data center in South Africa as part of its expansion into emerging markets, which previously included an acquisition of Main One. Equinix currently pays a dividend yield of 1.9%.
Crown Castle Inc. (CCI)
A competitor to and possible tax-loss harvesting partner for American Tower is Crown Castle. This REIT also operates in the telecommunications space, currently owning, operating or leasing over 40,000 cell towers and 80,000 miles of fiber optic cable across the U.S. The REIT reported third-quarter results for fiscal 2022 on Oct. 19. Notably, the REIT increased its annualized distribution yield by 6.5% to $6.26 per share. CEO Jay Brown noted that this was roughly in line with Crown Castle’s long-term annual dividend per share growth target of 7% to 8%. Since establishing this target in 2017, Crown Castle has increased distribution growth at an annualized rate of 9%. The REIT currently yields 4.7%.
Public Storage (PSA)
Are you a fan of the TV show “Storage Wars”? If so, this REIT is for you. Many storage facilities in the U.S. are leased from Public Storage, which currently owns, operates or has interests in around 2,500 self-storage facilities across 38 states. In total, Public Storage leases over 171 million square feet of space. The REIT has an international presence in Europe, too, given that it owns 35% of the common equity in Shurgard Self Storage SA (SHUR). Public Storage continues to grow, recently re-opening a facility near the Apple Inc. (AAPL) offices in Cupertino, California, on Dec. 12. This new facility was revamped to increase its size from 51,000 to 195,000 square feet, along with an increased focus on sustainability with solar panels. Public Storage currently yields 2.8%.
Realty Income Corp. (O)
In its 53 years of operation, dividend juggernaut Realty Income has declared 630 consecutive monthly distributions, and it has increased its distribution 118 times since 1994. Underlying this consistent income stream is the cash flow from over 6,500 properties, many of which are leased to commercial clients. Some of Realty Income’s most notable and durable tenants include Walgreens Boots Alliance Inc. (WBA) and Walmart Inc. (WMT). Thanks to its long history of dividend payouts and increases, the REIT has also been a long-standing member of the S&P 500 dividend aristocrats club. Realty Income currently pays a yield of 4.7%.
Simon Property Group Inc. (SPG)
Consumer cyclical stocks can be very profitable investments when the economy is performing well. During these boom cycles, heightened spending on shopping and dining can help these companies deliver above-average growth. A REIT with strong connections to consumer cyclical stocks is Simon Property Group, which holds a portfolio of properties involved in areas like retail stores, restaurants and malls. Although previously hard-hit by lockdowns from COVID-19, the REIT remains a popular pick due to its high distributions and investors banking on an eventual retail industry recovery. O stock may be a good bet for contrarian investors who don’t see a looming recession. The REIT currently yields 6.2%.
SBA Communications Corp. (SBAC)
Another good telecommunications REIT is SBA Communications. Currently, SBA has operations in 16 markets, notably in the U.S., Canada, Brazil, Argentina, Chile, Peru, South Africa and the Philippines. The REIT generates its revenues through two segments: long-term site leasing for wireless antenna space on multi-tenant towers and site development, where SBA helps other service providers and operations develop their own sites. In its third-quarter earnings for fiscal year 2022, SBA reported a 14.4% year-over-year increase in its adjusted funds from operations, or AFFO. This metric is important for REITs, as it measures the net cash generated, a crucial indicator of overall operating efficiency. SBA also recorded a 14.6% increase in revenue compared with the same quarter last year. The REIT currently pays a yield of 1%.
Welltower Inc. (WELL)
Although hard-hit by the impact of COVID-19 on senior assisted living facilities, Welltower remains a large player in the health care REIT industry. This REIT owns and operates a portfolio of senior housing, post-acute care, and outpatient medical facilities across the U.S. The REIT reported its third-quarter results for fiscal 2022 on Nov. 7, disclosing FFO growth of 5% compared with the previous year. During this time, Welltower made numerous investments and acquisitions, notably a 187-unit senior living facility in San Francisco for $114 million and a 99,000-square-foot medical office building in La Jolla, California, for $57 million. The REIT currently pays a yield of 3.8%.
9 best REITs to buy for 2023:
— Prologis Inc. (PLD)
— American Tower Corp. (AMT)
— Equinix Inc. (EQIX)
— Crown Castle Inc. (CCI)
— Public Storage (PSA)
— Realty Income Corp. (O)
— Simon Property Group Inc. (SPG)
— SBA Communications Corp. (SBAC)
— Welltower Inc. (WELL)
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9 Best REITs to Buy for 2023 originally appeared on usnews.com
Update 12/21/22: This story was previously published at an earlier date and has been updated with new information.
