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Colombianos Londres Group

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Meechie Chow
Meechie Chow

Real Estate Stocks To Buy Now

A majority of the best real estate stocks are structured as real estate investment trusts (REITs). REITs are entities that generate 75% of their income from the assets under their ownership which can be either real estate, cash, or US treasuries. Furthermore, they are required to give back at least 90% of their taxable income as dividends to shareholders. According to Nareit, all types of REITs in the US collectively own $4.5 trillion worth of gross assets, and publicly listed REITs own two-thirds of these assets. The market capitalization of all the publicly listed REITs in the US stands at $1.4 trillion as of Q3 2022, with 30 entities included in the S&P 500 Index. Some of the leading real estate companies in the market include American Tower Corporation (NYSE:AMT), Equinix, Inc. (NASDAQ:EQIX), and Simon Property Group, Inc. (NYSE:SPG).

real estate stocks to buy now

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Realty Income Corporation (NYSE:O) is a member of the distinguished Dividend Aristocrats List and is known for paying out dividends monthly. The stock offers an annual forward dividend yield of 4.87% as of October 28. Realty Income Corporation (NYSE:O) is considered one of the best real estate stocks by investors that are looking for a constant income stream.

In terms of total return and volatility-adjusted returns since 2000, Public Storage (NYSE:PSA) has outperformed the S&P 500 with a return of 16.9% and a standard deviation of 21.2%. The company is one of the best real estate stocks with strong opportunities for external growth.

The downturn in the stock market in 2022 has been rather widespread and knocked several high-quality stocks down right along with the ones that were overinflated. For short-term investors, that has meant a lot of worry and strife. But for long-term investors, now's a great time to be sort through what history tells us will likely be temporary wreckage to find the valuable bargains worth buying and holding.

Real estate investment trusts (REITs) have generally been a good place to turn to for both passive income and potential share price appreciation. This bear market has made many of these REITs far more affordable. As a recent retiree, I find REITs make sense in my portfolio whether it's a bull or a bear market. Two REITs that I own and can comfortably recommend are Terreno Realty (TRNO 2.13%) and Mid-American Apartment Communities (MAA 1.72%).

Mid-America Apartment and Terreno stocks are both trading down around 35% so far this year, compared with a roughly 23% drop for the S&P 500. But as the chart below shows, both these REITs have outperformed that big benchmark over the past decade when factoring in the total return.

While they're not the highest-yielding stocks on the block, these two REITs do outperform the greater market. Terreno's dividend is currently yielding about 2.7% while Mid-America Apartment is at about 3.3%. The average stock in the S&P 500 has a dividend yield of about 1.8%. Over the past decade, Terreno raised its payout by 233% while Mid-America Apartment has bumped its payout by about 80%.

Terreno and Mid-America Apartment are both good examples of stable real estate companies with seasoned management now leveraging strong markets for high-demand logistics space and apartment units in desirable locations, respectively, to build on long records of above-market performance. Their depressed share prices just add to their appeal, and they're likely to enjoy a strong recovery along with the general market itself when that happens.

Cheap, of course, is in the eye of the beholder. These two look that way to me now. I intend to actively add to my stake in both of them when I can, with no plans to sell unless conditions really change on their ground.

The past year has been a tough one for real estate investment trusts (REITs), with total returns (price + dividends) for the equity REIT sector outpacing the broader S&P 500. But double-digit declines over the last year could set the stage for some of the best REITs to rally in 2023.

Investment managers specializing in REIT stocks (opens in new tab) anticipate macro-conditions will remain challenging in the new year due to high interest rates, inflation and recession fears. Still, it's important to note that operating performances remain strong, creating the catalyst for a REIT recovery next year as fears abate and more certainty returns to capital markets.

REITs are likely to generate attractive income growth next year if the Federal Reserve can tame inflation and avoid a deep recession. Assuming this scenario, real estate investment trusts would be able to capitalize on the demand for leasing space that exceeds new supply, which has been constrained by steeply rising material and labor costs. This supply-demand imbalance will give REITs strong rental pricing power for many property types.

What's more, these are some of the best dividend stocks, with payouts that are well-covered by FFO (funds from operations, a key REIT earnings metric). Many of these names have generated a decade or more of steady dividend growth, while others are prepping for big 2023 dividend hikes.

Not many REITs have attracted analyst upgrades recently, but Prologis (PLD (opens in new tab), $118.59) is one of them. Scotiabank (opens in new tab) analyst Nick Yulico upgraded PLD to Outperform (Buy) from Sector Perform (Neutral), citing the company's compelling embedded rent growth, solid balance sheet and dominant real estate platform.

Prologis owns logistics real estate across the U.S., Europe and Asia; roughly 2.5% of global GDP flows through its distribution centers. Its portfolio is made up of warehouses representing 1.2 billion square feet of space leased to over 6,300 customers and is valued at $188 billion. Its customers are major logistics players like United Parcel Service (UPS (opens in new tab)) and DHL and e-commerce merchants like (AMZN (opens in new tab)) and Walmart (WMT (opens in new tab)). In addition to its existing facilities, the REIT owns a development-ready land portfolio that could add another 227 million square feet of new leasing space.

In September, ESS shares were featured on Bank of America's list of stocks offering above-market and secure dividends. The REIT is a Dividend Aristocrat that has delivered 28 consecutive years of dividend growth. Over the past five years, Essex has grown its dividend by around 5% each year, on average, and payout is conservative at 60% of FFO.

The REIT's cash flows are reliable, with less than one-quarter of its leases expiring through 2024. The $1 trillion U.S. industrial real estate market also provides STAG Industrial with plenty of growth opportunities. The REIT's acquisition pipeline is valued at $2.7 billion, but STAG is very selective in what it acquires. Last year, just 5% of the transactions in the REIT's pipeline met its due diligence standards and were acquired.

In addition to being one of the best REITs to buy, STAG is also one of the best monthly dividend stocks and has hiked payments every year since 2011. Dividend growth has been modest at just 0.8% annually over five years, but management has shared plans to grow future dividends in line with CAD (cash available for distribution). Boosting the dividend in line with CAD would suggest 4% annual hikes in the future.

Investors who have "stocks with reliably growing dividends" on their Christmas list should consider shares of National Retail Properties (NNN (opens in new tab), $46.21), which has delivered 33 consecutive dividend increases. This REIT invests in single-tenant, net-leased retail properties. It owns 3,349 properties encompassing 34.3 million square feet of leasing space, with assets valued at $9.4 billion.

Helped by five consecutive quarters of same-store rent growth, W.P. Carey delivered 9.7% FFO per share gains during the September quarter and increased full-year FFO guidance. After closing an acquisition that adds over $2 billion of new self-storage real estate assets, the REIT ended the September quarter with $2.2 billion of liquidity and a ratings upgrade by Moody's.

Income investors gravitate toward real estate investment trusts (REITs) if they want to diversify their portfolios and reap substantial profits. The appeal of these trusts is that anyone can profit from real estate without having the hassle or cost associated with owning physical properties. Moreover, these firms must distribute the major portion of their taxable income to their stockholders to gain a more advantageous tax status. Hence, they represent an excellent investment opportunity for investors during the current downturn.

Opendoor (NASDAQ:OPEN) is a giant in iBuying, a nascent industry that could potentially blow up in the future. It aims to revolutionize the real estate business by offering a convenient and fluid system of buying and selling homes. If it can continue to build its lead against its competitors, it will become an overwhelming market leader.

But that's just the tip of the iceberg. In last week's Total Wealth column, I wrote about the staggering amount of money that regional banks have tied up in loans, many of which are in the commercial real estate sector. Go back and check out that piece if you haven't already - while banks have gotten away for a while with not having to record the devaluation of those loans, that's about to change, and when it does, we could see a whole new round of depositor flight.

In the meantime, the spotlight on commercial real estate and its role in regional banks' insolvency has created some turmoil in the sector, which makes it one of the best places right now to go hunting for opportunities. You have to be very careful here - a lot of the household names you're familiar with are toxic traps right now and will drop your portfolio like deadweight.

Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see. 041b061a72


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