Investing in real estate investment trusts is a place made in the heavens. The COVID-19 pandemic may have hit the real estate industry, but it has already bounced back in 2021. Real estate investment trusts, popularly known as REITs, are a great investment to add to your portfolio. If you’re looking for a REIT for your portfolio? Want the best REIT Stocks? Then you’re at the right place.
REITs can have different focuses, which makes it difficult to choose your portfolio. There isn’t anything perfect. Therefore, more than one can fit the bill thus allowing you to diversify your portfolio.
Real estate investment trusts have the ability to provide inflation protection, income, and safety. REITs offer you some juicy dividends and provide you with an impressive passive income source. For this reason, we know REITs for their dividends.
If you’re thinking of going for real estate stocks instead of real estate investment trusts. Let’s make things more transparent for you.
While there is nothing wrong with holding individual real estate stocks, owning REIT ETFs can often be a better choice.
The two major advantages of REITs include instant diversification and professional portfolio management at a very low cost. Moreover, the majority of the REITs pay dividends every month.
What is a REIT?
A REIT, or Real Estate Investment Trust, is a unique investment vehicle that allows ordinary individuals to invest in real estate without actually buying entire properties. It is essentially like owning a slice of the real estate market without the hassle of being a landlord.
REITs pool money from investors to buy and manage income-generating properties such as commercial buildings, apartments, and shopping centers. As a shareholder, you benefit from regular dividend payouts based on the rental income generated by these properties.
REITs offer a great opportunity for diversifying your investment portfolio and accessing the potential returns of real estate without the need for substantial capital or expertise.
Whether you’re seeking stable income or long-term growth, REITs can be a valuable addition to your investment strategy.
How Do REITs Work?
As pointed out above, REITs are like a bridge connecting everyday investors to the world of real estate. They offer a hassle-free way to invest in real estate without actually owning properties.
Here’s how it works: REITs pool money from multiple investors and use those funds to buy and manage income-generating properties such as shopping malls, office buildings, and apartments.
As a shareholder, you become a part-owner of these properties and receive a portion of the rental income they generate.
According to legal regulations, REITs are obligated to allocate a substantial portion of their earnings to investors in the form of dividend payments.
So, by investing in REITs, you not only benefit from potential property value appreciation but also enjoy regular cash flow. It is much like having a real estate portfolio without the burdens of property management on a large scale.
Whether you’re looking for steady income or long-term growth, REITs can be a smart addition to your investment strategy.
Types of REITs
There are four main types of REITs that cater to different segments of the real estate market:
These allow people to invest in residential properties like apartments and homes, enabling them to benefit from rental income and potential appreciation in the housing market.
Office REITs focus on commercial office buildings, generating income from leasing office spaces to businesses and organizations seeking office facilities.
This type of REIT specializes in investing in healthcare-related properties such as hospitals, medical offices, and senior living facilities, providing an opportunity to profit from the growing demand for healthcare services.
Data Center REITs
Data center REITs invest in data centers, housing servers, and IT infrastructure, benefiting from the increasing demand for data storage and cloud computing services in the digital age.
Best REIT Stocks to Buy: May 2023
Below are our top picks for the best REIT stocks to buy for the year:
Broadstone Net Lease, Inc.
Broadstone Net Lease, Inc. (BNL) is a compelling choice with a dividend yield of 6.85%. Their investment strategy combines thorough credit analysis and smart real estate underwriting.
With a diverse portfolio of 801 net leased properties across different sectors and locations, BNL offers stability and growth potential for investors in 2023.
Essential Properties Realty Trust, Inc.
Essential Properties Realty Trust, Inc. (EPRT) is a compelling choice with a dividend yield of 4.4%. With a portfolio of 1,451 single-tenant properties leased to middle-market companies, EPRT offers stability and potential for long-term growth.
As a qualified REIT, it provides tax advantages and focuses on consistent income generation for investors in 2023.
WP Carey Inc
WP Carey Inc (WPC) is an excellent choice for investors in 2023. With a 50-year legacy, an impressive enterprise value of $24 billion, and a diversified portfolio of high-quality net lease properties, including self-storage facilities, W. P. Carey offers stability and potential for growth.
With a dividend yield of 6.03%, W. P. Carey stands out as a top REIT pick for those seeking consistent returns and a solid investment opportunity.
Their focus on the single-tenant industrial, warehouse, and retail properties in strategic locations, combined with long-term net leases and built-in rent escalations, provides reliable income.
Alpine Income Property Trust, Inc.
If you’re on the lookout for a great REIT to invest in this year, Alpine Income Property Trust, Inc. (PINE) deserves your attention.
With a juicy dividend yield of 6.7% and a stock price of $16.67, PINE aims to deliver attractive risk-adjusted returns and steady cash dividends.
They focus on owning and operating a portfolio of single-tenant net-leased commercial properties, which are mainly leased to high-quality publicly traded and credit-rated tenants.
This means you can expect stability and reliable income. As such, PINE stands among the best REIT stocks to buy in 2023, and is a promising opportunity that you won’t want to miss!
Alexander & Baldwin, Inc.
If you’re seeking a REIT that captures the essence of Hawai’i’s vibrant commercial real estate market, look no further than Alexander & Baldwin, Inc. (ALEX).
As the state’s largest owner of grocery-anchored shopping centers, ALEX offers a strong portfolio of approximately 3.9 million square feet of commercial space.
With a dividend yield of 4.62% and a price of $19, ALEX presents an attractive investment opportunity in 2023.
When it comes to REITs, One Liberty (OLP) stands out as a solid choice for 2023. With a geographically diversified portfolio of industrial and retail properties, OLP benefits from long-term net leases.
Offering a dividend yield of 8.73% and priced at $21, OLP presents an attractive opportunity for a steady income and potential growth.
Armada Hoffler (AHH) is a top pick for 2023. It boasts a dividend yield of 6.42% and is priced at $11.50, offering an enticing blend of income potential and growth prospects.
With decades of experience, AHH excels in developing, acquiring, and managing high-quality properties in the Mid-Atlantic and Southeastern U.S.
Modiv Inc. (MDV) is a standout choice for investors seeking a reliable income stream in 2023. With a dividend yield of 7.77% and priced at $14.80, MDV offers a reliable income stream.
Their focus on critical industrial properties and commitment to monthly dividends make them a promising choice for investors seeking stability and growth.
CTO Realty Growth
CTO Realty Growth, Inc. (CTO) stands out as a top pick for this year. With a dividend yield of 8.9% and priced at $17, CTO offers an attractive income potential.
Their portfolio of high-quality retail-based properties in thriving markets positions them for growth, and their ownership in Alpine Income Property Trust adds to their value proposition.
Presidio Property Trust
Presidio Property Trust Inc. (SQFT) is a compelling choice for 2023, boasting a remarkable dividend yield of 18.5% and priced attractively at $0.90.
With a diversified portfolio encompassing model home properties, office, industrial, and retail properties, Presidio offers a range of income-generating assets.
Although market conditions can be influenced by factors like COVID-19, Presidio’s strategic geographic clustering and involvement in Murphy Canyon Acquisition Corp. further enhance its investment potential.
Global Net Lease
Global Net Lease, Inc. (GNL) is an excellent pick for 2023 with a substantial dividend yield of 16.1% and a price of $10.23.
As a publicly traded REIT, GNL specializes in acquiring a diversified global portfolio of commercial properties, particularly single-tenant, income-producing net-leased assets.
Their emphasis on mission-critical properties and sale-leaseback transactions adds stability and potential for long-term income generation.
Empire State Realty Trust
Empire State Realty Trust, Inc. (ESRT) is a compelling choice for 2023 with a price of $6.60 and a dividend yield of 2.3%.
With its prime location in Manhattan and the greater New York metropolitan area, ESRT owns and manages office, retail, and multifamily assets, including the iconic Empire State Building.
The company’s focus on healthy buildings, energy efficiency, and indoor environmental quality positions them as leaders in sustainability. Their diverse portfolio and strong reputation make ESRT an attractive investment opportunity.
American Assets Trust
American Assets Trust, Inc. (AAT) stands out as a top REIT pick. With over 55 years of expertise, they excel in acquiring and managing premier properties in high-demand markets.
Their diversified portfolio includes office, retail, residential, and mixed-use spaces, offering stability and growth potential. Enjoy a solid dividend yield of 6.7% at an affordable price of $20.
Gladstone Commercial Corporation
Gladstone Commercial Corporation (GOOD) is a standout REIT pick. Their solid track record of 217 consecutive monthly cash distributions reflects stability and reliability.
Focusing on net-leased industrial and office properties nationwide, they offer a high dividend yield of 11.3% at an attractive price of $21.20. A strong choice for income-seeking investors.
Generation Income Properties
When it comes to REIT picks, Generation Income Properties, Inc. (GIPR) stands out.
With its internal management and focus on retail, office, and industrial net lease properties in high-demand areas, it offers a tempting dividend yield of 13% at a budget-friendly price of $4.50. A promising choice for savvy investors.
Arlington Asset Investment
Looking for a solid REIT pick? Consider Arlington Asset Investment Corp. (NYSE: AAIC). With its focus on mortgage-related and residential real estate, it’s positioned to benefit from the housing market.
Plus, being a REIT offers tax advantages to all its holders. At a price of $4.23, it’s an affordable opportunity to diversify your portfolio.
Hannon Armstrong Sustainable Infrastructure Capital
For those seeking a sustainable investment, look no further. Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI) is worth considering.
With a focus on energy efficiency and renewable energy projects, it aligns with the growing trend of sustainability. At $25 per share and a 6% dividend yield, it offers an attractive opportunity for both growth and income.
Looking for a high-yield REIT? Consider MFA Financial, Inc. (MFA). With a dividend yield of 14.2% and a price of $11.11, it offers an attractive income opportunity.
The company focuses on residential mortgage assets, including MBS and mortgage servicing rights, making it a promising pick in the real estate investment market.
Sachem Capital Corp. (SACH) is an epic REIT pick this year, offering a staggering dividend yield. With a dividend yield of over 16% and a price of $3.30, this real estate finance company presents a compelling investment opportunity.
Specializing in short-term loans secured by real property, Sachem Capital empowers real estate investors and owners to fund their residential or commercial property projects. Sachem primarily operates in the Northeastern United States and the Florida markets.
Two Harbors Investment
Two Harbors Investment Corp. (TWO) is yet another phenomenal pick among the best REIT stocks. This real estate investment trust specializes in residential mortgage-backed securities and mortgage servicing rights.
With its diverse portfolio, TWO offers the potential for solid returns. What’s more, as a REIT, it’s required to distribute at least 90% of its taxable income to shareholders, resulting in an attractive dividend yield of over 19%.
PennyMac Mortgage Investment Trust
Another strong contender in our list of best REIT stocks in 2023 is PennyMac Mortgage Investment Trust (PMT). With its focus on mortgage-related assets, the company offers attractive investment opportunities.
From credit risk transfer agreements to mortgage servicing rights, PennyMac diversifies its portfolio for potential returns. Plus, as a real estate investment trust, it aims to distribute over 90% of taxable income, resulting in a dividend yield of over 14%.
We now turn to Ladder Capital Corp (LADR), which is a great pick among the best REIT stocks. With a diverse portfolio spanning loans, securities, and real estate, Ladder Capital offers the potential for solid returns.
Its focus on cash-flowing commercial real estate, along with investments in CMBS and agency securities, makes it an attractive choice. Plus, with a dividend yield of almost 9% and a price of $10.30, it presents an enticing investment opportunity.
Highlands REIT, Inc.
Are you seeking the best REIT stocks to boost your portfolio in 2023? Consider Highlands REIT, Inc. (HHDS).
With a diverse portfolio of office, industrial, retail, and apartment assets, as well as unique properties like an unoccupied correctional facility and unimproved land, Highlands REIT offers a range of investment opportunities.
Since its spin-off from InvenTrust Properties Corp. in 2016, it has had a dedicated management team focused on maximizing the value of its portfolio.
Granite Point Mortgage Trust
Granite Point Mortgage Trust Inc. (GPMT) has positioned itself as one of the best REIT stocks to buy in 2023. With its focus on senior floating-rate commercial mortgage loans and strategic debt investments, Granite Point provides a unique opportunity for investors.
The company’s expertise in bridge financing and value creation through property improvements makes it an attractive choice. Additionally, its status as a real estate investment trust ensures potential tax benefits for shareholders.
With a dividend yield of over 18% and a price of $5.20, Granite Point Mortgage Trust Inc. offers both income potential and growth prospects.
AG Mortgage Investment Trust
When considering the best REIT stocks for 2023, AG Mortgage Investment Trust, Inc. (MITT) stands out as a compelling choice.
Specializing in residential mortgage investments, MITT’s portfolio includes a diverse range of assets, from agency-eligible loans to non-agency residential mortgage-backed securities.
As a qualified real estate investment trust, MITT offers potential tax advantages for investors. With a dividend yield of over 13% and a price of $5.90, it combines attractive income potential with a favorable investment outlook.
NexPoint Real Estate Finance
On the hunt for the best REIT stocks to include in your investment portfolio? NexPoint Real Estate Finance, Inc. (NREF) brings a unique mix of assets to the table.
As a commercial mortgage REIT, NexPoint focuses on a diverse range of investments, including first-lien mortgage loans, mezzanine loans, preferred equity, and more. With a dividend yield of 13.2% and a price of $15.20, it offers attractive income potential.
Being a qualified REIT, it can provide tax advantages for investors. NexPoint is positioned to capitalize on the thriving real estate market.
Chicago Atlantic Real Estate Finance
Looking to diversify your investment portfolio with the best REIT stocks? Chicago Atlantic Real Estate Finance, Inc. (REFI) could be a strong contender for your consideration.
Being a qualified REIT, it can provide tax advantages for investors. Based in Chicago, Illinois, it is well-positioned to benefit from the evolving cannabis market.
This commercial real estate finance company stands out for its unique focus on providing senior loans to state-licensed operators in the cannabis industry. With a dividend yield of 14.5% and a price of $15 per share, it offers attractive income potential.
Starwood Property Trust, Inc
Starwood Property Trust, Inc. (STWD) is a versatile REIT that operates across various segments, including commercial and residential lending, infrastructure lending, property, investing, and servicing.
With a dividend yield of 10.4% and a price of $18.5 per share, it offers compelling income potential. As a qualified REIT, it can provide tax advantages. Expand your portfolio with Starwood Property Trust and benefit from its diverse real estate investments.
Stockland Stapled Securities
Stockland Stapled Securities (SGP) stands out as among the best REIT stocks a compelling choice. With its recently released results for the half-year ending in December 2022, Stockland showcased steady growth.
Funds From Operations (FFO) increased by 0.7% compared to the previous year, and Adjusted Funds From Operations (AFFO) saw a 5.7% increase.
Despite a lower statutory profit in 1H23, Stockland’s high-quality portfolio and favorable capitalization rates make it an attractive option for investors seeking stability and potential returns in the REIT market.
Blackstone Mortgage Trust
Blackstone Mortgage Trust, Inc. (BXMT) stands out as a clear winner among the best REIT stocks.
With its focus on originating senior loans collateralized by commercial properties across multiple regions, including North America, Europe, and Australia, the company offers a diversified investment opportunity.
Operating as a real estate investment trust, it provides potential tax advantages. With its affiliation with the renowned Blackstone company and a yield of 13%, this REIT presents a strong investment prospect for 2023.
Best Healthcare REIT Stocks
Listed below are the 10 best healthcare REIT stocks belonging to the healthcare domain:
- Healthcare Trust of America (HTA)
- Welltower (WELL)
- Ventas (VTR)
- Medical Properties Trust (MPW)
- Physicians Realty Trust (DOC)
- Healthcare Realty Trust (HRT)
- Acadia Healthcare Company (ACHC)
- Omega Healthcare Investors (OHI)
- LifePoint Health (LPNT)
- Select Medical Corporation (SEM)
Best Real Estate REIT Stocks
Listed below are the 10 best real estate REIT stocks belonging to the healthcare domain:
- American Tower Corporation (AMT)
- Simon Property Group, Inc. (SPG)
- Prologis, Inc. (PLD)
- Equinix, Inc. (EQIX)
- Digital Realty Trust, Inc. (DLR)
- Crown Castle International Corp. (CCI)
- Boston Properties, Inc. (BXP)
- Alexandria Real Estate Equities, Inc. (ARE)
- Public Storage (PSA)
- Vornado Realty Trust (VNO)
Key Metrics to Evaluate REIT Stocks
When it comes to evaluating REIT stocks to buy, you want to look at some important metrics that can give you a good sense of their potential. Here are a few key ones to keep in mind:
- Funds From Operations (FFO): Measures a REIT’s cash flow from core operations, providing insight into sustainable dividends.
- Dividend Yield: Indicates the percentage of the stock price you’ll receive as dividends, adding to potential returns.
- Occupancy Rate: Reflects the percentage of leased properties, signaling stable rental income generation.
- Debt-to-Equity Ratio: Shows the balance between debt and shareholder equity, revealing financial stability.
- Historical Performance: Analyzing dividend growth, stock price appreciation, and overall return provides insights into past success and potential future performance.
Pros and Cons of Investing in REIT Stocks
Investing in REIT stocks can be a smart move, but like any investment, it’s essential to consider the pros and cons. These are discussed in the table below:
Pros of Investing in REIT Stocks
Cons of Investing in REIT Stocks
REITs offer the opportunity to diversify your investment portfolio by adding real estate exposure, potentially reducing risk.
Like any investment, REIT stocks are subject to market fluctuations, and the value of your investment can rise or fall.
REITs are known for their consistent dividend payments, providing a steady stream of passive income for investors.
Interest Rate Sensitivity
Rising interest rates can affect REITs, as they may increase borrowing costs and potentially impact profitability.
With REITs, you can leave the property management tasks to experienced professionals, saving you time and effort.
As a shareholder, you have minimal control over specific property decisions made by the REIT’s management.
Accessibility and Liquidity
Investing in REIT stocks is as easy as buying and selling regular stocks, ensuring quick access to your investments when needed.
REIT dividends may have different tax implications compared to traditional stock dividends, requiring careful tax planning.
Investing in REITs: Tips and Strategies
When it comes to considering REIT stocks to buy, here are some tips and strategies to keep in mind:
- Do Your Research: Conduct thorough research on REITs before investing.
- Align Goals and REITs: Match your investment goals with the type of REIT that suits you.
- Diversify Your Portfolio: Spread investments across different types of REITs.
- Analyze Key Metrics: Assess important metrics like FFO, dividend yield, occupancy rate, and debt-to-equity ratio.
- Stay Informed: Keep up with market trends, economic conditions, and regulatory changes.
- Seek Professional Advice: Consider consulting a financial advisor for personalized guidance.
Risk Factors and Considerations
When looking into REIT stocks to buy, it’s important to be aware of the risk factors and considerations. Here are a few key pointers to consider:
- Interest Rate Sensitivity: Rising interest rates can affect REITs, as they may lead to higher borrowing costs and potentially impact profitability.
- Economic Conditions: Changes in the overall economy, such as recessions or slowdowns, can impact the demand for real estate and affect REIT performance.
- Sector-Specific Risks: Different sectors, like retail, residential, or office, have their own dynamics and risks. Consider the specific sector’s outlook and potential challenges.
- Property-Specific Risks: Each property owned by a REIT carries its own risks, such as location, tenant quality, or property maintenance.
- Regulatory Changes: Government regulations, tax policies, or zoning laws can impact REIT operations and profitability.
Factors Influencing REIT Performance
When it comes to REIT performance, several factors come into play that can make a difference. Let’s dive into them:
- Economic Conditions: The overall economic climate can influence the demand for real estate and rental rates in a significant way.
- Interest Rates: When interest rates rise, borrowing costs go up, potentially impacting the profitability of REITs.
- Property Market Trends: It is important to keep track of supply and demand dynamics. Shifts in property sectors can affect occupancy rates and rental income.
- Location, Location, Location: In real estate, location is king. Properties in prime areas have better growth potential.
- Tenant Quality: Tenants are the main money makers in the REIT business. It is important to have creditworthy and stable tenants that can positively impact rental income and lease renewals.
- Management: Good management makes all the difference – effective property operations and leasing strategies can boost overall REIT performance.
In conclusion, investing in REIT stocks can be a rewarding opportunity in 2023. With their potential for consistent income, diversification benefits, and professional management, REITs offer a unique avenue for real estate investment.
Consider your investment goals and risk tolerance, and seek professional advice if needed. Remember, investing involves risks, and it’s essential to make informed decisions aligned with your financial objectives.
By staying informed, conducting thorough research, and maintaining a diversified portfolio, you can navigate the world of REIT stocks and potentially reap the rewards they offer in the year ahead. Happy investing!
Frequently Asked Questions
How Do I Buy REIT Stocks?
To buy REIT stocks, you can open a brokerage account, research and select the REITs you’re interested in, and place an order to purchase them through your chosen brokerage platform.
What Is the Dividend Yield For REIT Stocks?
The dividend yield for REIT stocks can vary but is typically higher than many other types of stocks due to their requirement to distribute a significant portion of their income as dividends.
How Are REIT Stocks Taxed?
REIT stocks are subject to specific tax rules where the dividends received by investors are typically taxed as ordinary income.
Can I Reinvest Dividends from REIT Stocks?
Yes, many REITs offer dividend reinvestment plans (DRIPs) that allow investors to automatically reinvest their dividends to purchase additional shares.