Real estate investments can be an excellent way to earn returns, generate cash flow, hedge against inflation and diversify an investment portfolio. But buying physical properties can be costly, difficult and risky. Instead, investors can buy shares of diversified real estate investment trusts, or REITs, which are public companies that own large portfolios of real estate and pay sizable dividends.
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There are many different types of REITs, providing investors access to residential, commercial and specialty real estate. Here are nine of the best REITs to buy in 2024, according to Morningstar analysts:
| Stock | Implied upside from Jan. 3 close | Forward dividend yield |
| Crown Castle Inc. (ticker: CCI) | 14.5% | 5.5% |
| Welltower Inc. (WELL) | 15.8% | 2.7% |
| Realty Income Corp. (O) | 31.6% | 5.3% |
| AvalonBay Communities Inc. (AVB) | 27.1% | 3.6% |
| Equity Residential (EQR) | 43.4% | 4.4% |
| Invitation Homes Inc. (INVH) | 20.3% | 3.3% |
| Ventas Inc. (VTR) | 45% | 3.6% |
| Essex Property Trust Inc. (ESS) | 25.6% | 3.8% |
| Host Hotels & Resorts Inc. (HST) | 17.6% | 3.3% |
Crown Castle Inc. (CCI)
Crown Castle International is a specialty REIT that owns and operates wireless communications towers. In 2023, Crown Castle shares fell 10.2% including dividends, the worst performance of any stock on this list. On the other hand, the underperformance boosted the stock’s dividend yield and provided a buying opportunity. Analyst Matthew Dolgin says Crown Castle’s soft 2024 guidance implies the recent slowdown in tower leasing activity will continue, but he says the stock is “significantly undervalued” at current levels given long-term mobile data consumption growth. Morningstar has a “buy” rating and $130 fair value estimate for CCI stock, which closed at $113.49 on Jan. 3.
Dividend yield: 5.5%
Welltower Inc. (WELL)
Welltower is a health care REIT that invests in health care facilities, including senior housing, specialty care facilities and medical office buildings. The REIT rose 41.8% in 2023, the best performance of any stock on this list. Welltower closed $1.4 billion in acquisitions in the third quarter and another $922 million in acquisitions before its quarterly earnings call. Analyst Kevin Brown says a recovery in senior housing demand is supporting same-store growth, and an aging U.S. population will be a long-term tailwind. Morningstar has a “buy” rating and $103 fair value estimate for WELL stock, which closed at $88.91 on Jan. 3.
Dividend yield: 2.7%
Realty Income Corp. (O)
Realty Income is a retail REIT that owns, develops and manages U.S. retail real estate with a focus on single-tenant buildings. It is the largest triple-net REIT in the U.S., meaning tenants pay all property expenses, including real estate taxes, maintenance and building insurance. Realty Income has a 5.3% dividend yield and makes monthly dividend payments, making it an attractive income source. Brown says Realty Income’s pending merger with Spirit Realty represents yet another opportunity for Realty management to create value for investors. Morningstar has a “buy” rating and $76 fair value estimate for O stock, which closed at $57.73 on Jan. 3.
Dividend yield: 5.3%
AvalonBay Communities Inc. (AVB)
AvalonBay Communities is a multifamily residential REIT that specializes in upscale apartment communities. Brown says AvalonBay owns high-quality, multifamily buildings located in healthy, coastal, urban and suburban markets that have favorable demographics. These high-quality assets allow AvalonBay to maintain both high occupancy rates and strong rent growth. He says key markets such as New England, New York and the mid-Atlantic regions have attractive traits, including job growth, income growth and correlating homeownership rates. Brown says AvalonBay has also historically created significant shareholder value via development projects. Morningstar has a “buy” rating and $233 fair value estimate for AVB stock, which closed at $183.29 on Jan. 3.
Dividend yield: 3.6%
[READ: 8 Best Real Estate Stocks to Buy.]
Equity Residential (EQR)
Equity Residential is a multifamily residential REIT that owns and operates a diversified portfolio of apartment properties. Brown says Equity Residential has restructured its portfolio over the past decade to focus on attractive markets, such as urban, coastal regions with favorable demographics, high occupancies and strong rent growth. The company has divested inland properties and expanded in high-growth core markets, including Los Angeles, San Diego and San Francisco. Brown says the strategy of selling non-core assets and investing in development projects or acquisitions has created significant shareholder value. Morningstar has a “buy” rating and $87 fair value estimate for EQR stock, which closed at $60.66 on Jan. 3.
Dividend yield: 4.4%
Invitation Homes Inc. (INVH)
Invitation Homes owns, operates and leases single-family U.S. homes. Brown says Invitation’s expenses remain elevated, and 4% same-store operating income growth in the third quarter was disappointing. However, Invitation Homes reported 2,257 home acquisitions in the quarter, about double the company’s previous record for quarterly acquisition volume. Brown says Invitation’s portfolio is diversified and focused on new and starter homes in markets where the cost of renting is lower than the cost of homeownership, a dynamic that supports high occupancy rates and rent growth. Morningstar has a “buy” rating and $41 fair value estimate for INVH stock, which closed at $34.07 on Jan. 3.
Dividend yield: 3.3%
Ventas Inc. (VTR)
Ventas is a health care REIT that specializes in health care facilities, including specialty care facilities, housing for seniors, medical office buildings and hospitals. Brown says Ventas reported an impressive jump in senior housing occupancy in the third quarter. Same-store senior housing occupancy increased 130 basis points sequentially to 83.6% in the quarter. In addition, senior housing rental rates were up 6.2% year over year and same-store revenue growth of 7.5% exceeded Brown’s expectations. He says Ventas should fully recover to pre-pandemic occupancy rates by 2025. Morningstar has a “buy” rating and $72 fair value estimate for VTR stock, which closed at $49.65 on Jan. 3.
Dividend yield: 3.6%
Essex Property Trust Inc. (ESS)
Essex Property Trust is a residential REIT that owns and operates multifamily properties in California and the Pacific Northwest. Brown says Essex’s portfolio is extremely geographically focused on West Coast markets that are positioned for long-term growth thanks to trends such as job growth, income growth and falling homeownership rates. In addition, he says Essex’s modest development pipeline will contribute to its value over time. While the company’s core markets are solid, Brown says its West Coast concentration exposes investors to potential downturns in the technology sector. Morningstar has a “buy” rating and $305 fair value estimate for ESS stock, which closed at $242.74 on Jan. 3.
Dividend yield: 3.8%
Host Hotels & Resorts Inc. (HST)
Host Hotels & Resorts is a hotel and resort REIT that owns a portfolio of luxury hotels in the U.S. Brown says lower cancellation fees and the Maui wildfires weighed on Host Hotels’ revenue growth in the third quarter. However, the Hyatt Regency Maui reopened to guests on Nov. 1, and Brown says the fires will not have a lasting impact on demand. He says Host Hotels shares can be volatile compared to other REITs, often reacting strongly to U.S. economic news. Morningstar has a “buy” rating and $23 fair value estimate for HST stock, which closed at $19.56 on Jan. 3.
Dividend yield: 3.3%
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9 of the Best REITs to Buy for 2024 originally appeared on usnews.com
Update 01/04/24: This story was previously published at an earlier date and has been updated with new information.
