REITs are presently in demand by the market at large. Institutional investors, in particular, have picked up on the inherent value this class of stocks holds, especially in such uncertain times. When the market undergoes stress, people turn to a range of crisis-appropriate investments, of which REITs are a highly popular form. This is because the value of real estate-based income is perceived as being highly reliable, even when the market may be receding. Given the present market context, there are a number of highly compelling reasons why investing in Best REITs stocks is the best choice for any investor right now.
For one their valuations are the most attractive they have been in years, given their extremely low prices with rock-solid fundamentals. Moreover, rental income trends are at record high levels, which have translated into extremely promising dividend yields. For this reason, private equity firms have been accumulating REIT stocks in an unprecedented manner. Investors as a whole should not let this golden opportunity go. In light of this, we bring forth a list of five exciting REITs that are a must-buy in the present climate.
The first stock on our list is Whitestone (NYSE: WSR). Whitestone is the best REIT stock because of the inherent nature of real estate it targets, in order to deliver robust earnings for its shareholders. These real estate assets are inherently service-oriented, and primarily include grocery stores and shopping centers, within neighborhoods with high growth potential. This allows for high cash flow, even during the toughest of recessions. This is partly why even a corporate giant such as Amazon Inc. has been parking its funds into this class of real estate with Whole Foods, which is a tenant of WSR.
A major strength that is associated with Whitestone properties is its strategic and growth-oriented locations. The overwhelming majority of these properties are found in Phoenix, Arizona, in the zones that are known to have a maximized value appreciation potential due to being within the Sunbelt market zones. As a result, both occupancies, as well as rental income through these have been growing at a faster-than-average rate. The stock is a great one to buy given its forward-looking potential, also considering that its market capitalization is presently at a 35% discount to its net asset value, as per its recent balance sheet. The REIT’s dividend yield is also impressive at 4.81%.
The second REIT we present on this list is UMH Properties (NYSE: UMH). Unlike most conventional REITs, UMH does not target giant metropolitan cities but rather turns its focus to housing communities that were developed in outskirt zones. The primary occupants in these properties, therefore, are remote employees, as well as blue-collar workers and retired individuals. This business model is one that is significantly resilient to recession and macroeconomic shocks, as everyone seeks basic housing even in the toughest of times. This is especially true for UMH Properties, which targets middle and lower-middle-income households.
According to its management, UMH funds from operations per share are going to rise by 50% in the next five years. This translates to a 10% appreciation on an annual basis, for a recession-proof REIT. Even before waiting for this growth in five years, shareholders of UMH can enjoy a 5% dividend yield in the meantime. The present opportunity is prime to enter into a position on the REIT, given the price fall, it has experienced owing to wider bearish conditions. The stock is down 25% from where it was 12 months ago and is trading at a 30% discount to its net asset value. UMH is one of the best REITs stocks that is hard to ignore for those looking to ensure growth and a return of value, regardless of macroeconomic stresses.
Number three on this list is communication infrastructure REIT, Uniti Group (NASDAQ: UNIT). Given the nature of the market, Uniti taps into it, it is also a highly resilient business with a fiber network that is critical to various industries and communities throughout the United States. Given its extensive scale and vast network of communication infrastructure, Uniti stands as one of the top ten largest fiber providers in the United States. The company at present boasts a total fiber route figure of 126,000 miles laid out predominantly in the Eastern and Southern United States.
Moreover, UNIT is a secure income stock, not just given its critical nature, but also the nature of its relationship with clients. The average time to maturity for its fiber portfolio is more than eight years, which is ideal for those seeking to hold the best REIT stocks for the longer term. Furthermore, those wary of interest rate hikes would be pleased to know that 96% of Uniti’s debt is based on fixed-rate contracts, which secures it from a financial standpoint. Its business performance is equally as impressive, with average funds from operations climbing 7.3% in its most recent quarter and a dividend yield of 6.5%.
Despite all these strengths, Uniti presently holds a highly attractive valuation. At only $9 a share, UNIT is presently trading at less than half its replacement cost. To further put this figure into context, Uniti’s management, earlier this year refused a $15 per share buyout bid, claiming that the proposed price seriously undervalues the company. This indicates that in the present opportunity, UNIT is a screaming buy.
City Office REIT
Moving on, we take a look at the high-quality and premium office space player, City Office REIT (NYSE: CIO). CIO holds ownership over real estate assets in San Diego, Seattle, Portland, Phoenix, Denver, Orlando, and many other metropolitan cities that are home to some of the largest corporate giants of the world. City Office REIT experienced somewhat of a boom during the outbreak of Covid-19, as businesses sought value-enhanced leasing, which is CIO’s primary business strategy. Similarly, it has strategically included properties in its wider portfolio that belong to states where taxation is either non-existent or at extremely low levels. This maximizes the value that shareholders seek.
Given that CIO’s business model is fully oriented toward value maximization, its dividend yield of 7.1% is one of the highest on this list, which is compelling given the wider levels of inflation presently experienced. Analysts have set a growth consensus for 2023 at an incredible 28%, given the robust underlying fundamentals that are inherent to CIO. This is highly impressive, especially considering the value it already returns to its shareholders in the form of dividends.
This REIT is perfect for those that are looking to gain exposure to real estate with the prime purpose of seeing their portfolios fly in the upcoming years.
Medical Properties Trust
The final REIT we present on this list is that of Medical Properties Trust (NYSE: MPW). This is a pure-play REIT we’ve added to the list for those with a bit of a risk appetite that can handle short-term volatilities. This Alabama-based investment trust holds within its overall portfolio a total of 447 properties that it has leased to 54 operators.
Since the start of 2022, MPW is down over 40%, which presently makes it the most attractive healthcare REIT in terms of its valuation alone. Similarly, MPW is one of those few best REITs stocks that has consistently been upping its dividend payments since 2014, despite the blows the global market has received throughout this time. Since 2014, dividend payments have seen an increase of 45%, which is far higher than the growth rate of the industrial average. Physicians Realty Trust, which is another top healthcare REIT, during the same time frame, has only upped its dividends by 27%.
Given the triple-net lease structure MPW follows, it stands largely insulated from inflationary cost pressures. The triple-net lease structure means that tenants are responsible for rent payments, as well as property tax and insurance premiums. This lays a significant economical burden off MPW, allowing it to return maximized value to its shareholders.
REITs appear to be in demand once again. With the macroeconomic uncertainty that 2022 brought upon the global markets, investors apparently stayed clear of this investment class, with a pessimistic outlook towards rental income and occupancy trends. However, this fearful hesitation was far from fundamental realities. REITs saw driving down in the bearish market panic, despite rock-solid fundamentals. This, therefore, presents a golden opportunity for investors to consider parking their funds in REITs. The best REITs stocks listed in this article are great options to consider for those looking to avail of this brilliant value opportunity.