Real estate investments can be an excellent way to earn returns, generate cash flow, hedge against inflation and diversify an investment portfolio. Buying physical properties can be costly, difficult and risky for an individual, however.
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Instead, investors can buy shares of diversified real estate investment trusts, or REITs. REITs are public companies that own large portfolios of real estate, and many of them also pay sizable dividends. 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:
| REIT Stock | Forward dividend yield |
| Prologis Inc. (ticker: PLD) | 3.8% |
| American Tower Corp. (AMT) | 3.7% |
| Welltower Inc. (WELL) | 2.6% |
| Public Storage (PSA) | 4.6% |
| Realty Income Corp. (O) | 5.7% |
| Crown Castle Inc. (CCI) | 6.6% |
| Extra Space Storage Inc. (EXR) | 4.7% |
| AvalonBay Communities Inc. (AVB) | 3.6% |
| Equity Residential Properties Trust (EQR) | 4.2% |
Prologis Inc. (PLD)
Prologis is an industrial REIT that specializes in logistics real estate. Shares are down 23% this year through May 1, making it the worst-performing stock on this list. Analyst Suryansh Sharma says Prologis shares rallied impressively off their October 2023 lows in anticipation of interest rate cuts. As the timing of rate cut expectations have been pushed back further into the future, Prologis shares have underperformed. Fortunately, Sharma says the recent sell-off is overly pessimistic and does not account for the bullish long-term trajectory for the logistics real estate industry. Morningstar has a “buy” rating and $120 fair value estimate for PLD stock, which closed at $101.88 on May 1.
American Tower Corp. (AMT)
American Tower is a specialized REIT that operates the world’s largest independent portfolio of wireless communications and broadcast towers. Analyst Matthew Dolgin says the tower business is attractive and will remain a critical component of expanding wireless networks. Dolgin says more international exposure will be preferable for tower operators in coming years. He says American Tower’s overall strategy of global diversification is sound. Dolgin believes the company missed out on a huge opportunity by divesting its assets in India, but African markets could still be a major growth source. Morningstar has a “buy” rating and $215 fair value estimate for AMT stock, which closed at $176.84 on May 1.
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. Analyst Kevin Brown says Welltower and other leading REITs are trading at significant discounts to fair value following two years of rising interest rates. Brown says Welltower and other top health care REITs are well positioned to continue to capitalize on the Affordable Care Act. In addition, an aging Baby Boomer generation should serve as a huge demand driver for the health care facilities industry. Morningstar has a “buy” rating and $107 fair value estimate for WELL stock, which closed at $94.36 on May 1.
Public Storage (PSA)
Public Storage is the largest owner of self-storage facilities in the U.S. Brown is bullish on the company’s strategy to own and operate self-storage facilities within a five-mile radius of densely populated urban centers. In addition, he says the company’s efforts to aggressively invest in improving its coverage, operating efficiency, brand value, scale and technology make it an attractive investment. The self-storage industry is recession resistant, and Brown says Prologis and other large self-storage industry players will continue to gain market share in the long term. Morningstar has a “buy” rating and $310 fair value estimate for PSA stock, which closed at $260.15 on May 1.
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 real estate taxes, maintenance and building insurance. Realty Income has a 5.7% dividend yield and makes monthly dividend payments, making it an attractive income source. Brown says Realty Income’s retail tenants are largely focused on defensive segments that are service oriented or naturally insulated from e-commerce competition. Morningstar has a “buy” rating and $76 fair value estimate for O stock, which closed at $53.92 on May 1.
Crown Castle Inc. (CCI)
Crown Castle International is a specialty REIT that owns and operates wireless communications towers. Crown Castle has a 6.6% dividend yield, the highest of any stock on this list. Dolgin says Crown Castle’s small cell revenue growth has accelerated. In addition, he is bullish on the company’s strategic review of its fiber segment and the addition of new CEO Steven Moskowitz. Dolgin says Crown Castle shares will remain sensitive to the interest rate outlook, but the market is overlooking some significant long-term value. Morningstar has a “buy” rating and $130 fair value estimate for CCI stock, which closed at $95.23 on May 1.
Extra Space Storage Inc. (EXR)
Extra Space Storage is one of the largest publicly traded self-storage REITs. Sharma says Extra Space’s self-owned and operated storage facilities are complemented by a lucrative insurance business and an attractive third-party management business. In fact, he says Extra Space’s third-party management business is the largest in the U.S. and has allowed the company to grow its geographical footprint and data sophistication without investing a large amount of capital. Sharma says self-storage is considered recession resistant because demand is partially driven by difficult life events. Morningstar has a “buy” rating and $160 fair value estimate for EXR stock, which closed at $138.70 on May 1.
AvalonBay Communities Inc. (AVB)
AvalonBay Communities is a multifamily residential REIT that specializes in upscale apartment communities. Brown says AvalonBay’s high-quality buildings are focused in coastal urban and suburban markets that have favorable demographics that support high occupancy rates and rent growth, including the New England, mid-Atlantic and New York/New Jersey markets. He says these markets have traits that drive apartment demand, including decreasing homeownership rates and job and income growth. Brown says AvalonBay also effectively recycles capital by divesting non-core assets and investing in projects with promising growth prospects. Morningstar has a “buy” rating and $213 fair value estimate for AVB stock, which closed at $187.93 on May 1.
Equity Residential Properties Trust (EQR)
Equity Residential is a multifamily residential REIT that owns and operates a diversified portfolio of apartment properties. The stock is up 5.8% through May 1 this year, the best performance of any REIT on this list. Brown says Equity has sold off underperforming properties in southern and inland markets and focused on attractive, high-growth core markets such as Los Angeles, San Francisco and San Diego. He is cautious on the REIT’s long-term growth prospects but says the company has a track record of creating significant shareholder value via development projects. Morningstar has a “buy” rating and $79 fair value estimate for EQR stock, which closed at $64.04 on May 1.
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9 of the Best REITs to Buy for 2024 originally appeared on usnews.com
Update 05/02/24: This story was previously published at an earlier date and has been updated with new information.
