With the U.S. Federal Reserve eyeing another potential interest rate cut, income investors are struggling to find ways to earn strong returns on their capital.
The 10-year U.S. Treasury interest rate recently slumped to 1.95%, its lowest levels in three years, last week...
Now, with equity investors demanding that the Fed cut rates, we can expect interest rates to fall even further.
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One way for investors to make income is to focus on alternative assets that can provide a combination of strong yield and price appreciation upside.
Real estate investment trusts (REITS) provide that sort of protection and upside due to their structure and reliance on strong cash flows.
However, choosing the best REIT can be a challenge for investors. With more than 511,000 properties owned by the 1,100 registered REITs across the country, investors need a way to break down all their options to one single number.
For us, we recommend using the Money Morning Stock VQScore™. Today, we implemented our system to identify the top REIT to buy in July 2019.
Roughly 80 million Americans own REITs in their retirement accounts or through some other form of investments. These investments offer investors strong cash flow, a variety of tax benefits, and access to some of the top money managers in the country.
But finding the best REIT to own remains the challenge.
The Money Morning Stock VQScore weeds through the hundreds of different options. Derived from our proprietary valuation system - the VQScore system tracks the most profitable public market REITS and rates each with a figure from 1 to 4.
The higher the number, the more likely this REIT is to break out in the future and deliver huge upside to investors.
The Best REIT to Buy Now
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Today, VQScore says that investors should purchase Lexington Realty Trust (NYSE: LXP).
Since 1973, the company has operated as a fully integrated REIT with a broad portfolio of 138 properties across 34 states.
Its emphasis is on long-term single-occupancy industrial and institutional leases, with a weighted-average lease term of nine years. Combining those lease terms with a 94.9% occupancy rate makes the firm a long-term buy and an asset that will deliver superior cash flows.
You see, LXP caters to powerhouse "blue chip" companies with strong balance sheets and global reach.
Lexington Realty Trust clients include Cummins Inc. (NYSE: CMI), Charles Schwab Corp. (NYSE: SCHW), FedEx Corp. (NYSE: FDX), Michelin North America, Caterpillar Inc. (NYSE: CAT), Amazon.com Inc. (NASDAQ: AMZN), Phillip Morris International Inc. (NYSE: PM), Walgreen Boots Alliance Inc. (NYSE: WBA), and Wells Fargo & Co. (NYSE: WFC).
That sort of customer base provides risk diversity to the U.S. economy and ensures that the firm is not overly reliant on one sector of the economy to be successful.
It's worth noting that LXP stock underperformed in 2017-18. The firm experienced a dip in annual revenue over the two years.
In response, the company shifted its attention to more industrial-focused properties. Last year, Lexington increased its industrial exposure to 71% of its total gross book value compared to 49% at year-end 2017.
Lexington also increased its cash position and its share buyback program as a result. Now, it looks ready to break out even more after its 17.5% return in the first half of 2019.
Lexington Realty has a VQScore of 4.75, putting it square it in the "Strong Buy" category. A breakout is just on the horizon.
Lexington Realty Trust offers investors an alternative to traditional bonds and stocks. With a dividend of 6% on income-producing assets like housing and industrial properties, the stock offers a nice balance of yield and appreciation upside.
Currently, shares trade for $9.55 each. However, a flight to safer assets and an interest rate cut by the Federal Reserve could propel LXP shares as much as 36% over the next six months.
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