One of the Top REITs to Buy Right Now Yields 7%

Income-seeking investors have often turned to the bond market for stable returns. But with the 10-year Treasury yield slumping to 2.12%, down from last year's high of 3.22%, income investors are turning to the stock market.

That's why we're giving you the best REIT to buy right now.

Real estate investment trusts (REITs) offer strong cash flow and tax benefits to investors - plus the best REITs offer a solid upside as well. That gives you the income and growth potential you simply won't find in the bond market. It's no wonder why 80 million Americans already own REITs in one way or another.

But finding the top REITs to buy can be difficult for income investors. There are 1,100 registered REITs across the United States. And these 1,100 REITs have more than 511,000 properties. So investors need a way to sift through all the options to find the best REITs out there.

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That's what we designed our Money Morning Stock VQScore™ to do. Our proprietary VQScore algorithm hones in on only the best stocks with upside potential. And we've used it to screen for the best REITs to buy today.

Fortunately, our VQScore system has found one of the best REITs to buy right now. And it offers an insane 7% dividend yield as well.

Plus, it has a 44% upside over the next 12 months...

One of the Top REITs to Buy Right Now Yields 7%

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The best REIT is Brookfield Property REIT Inc. (NYSE: BPR). This is a U.S.-focused companion REIT for Brookfield Property Partners LP (NASDAQ: BPY).

Both BPR and BPY are technically subsidiaries of Brookfield Asset Management Inc. (NYSE: BAM). And BAM is one of the biggest asset management firms in the world, with a market cap of $48.5 billion.

What's useful for us here is that Brookfield Asset Management created BPR to be a REIT that's economically the same as BPY. It's designed to allow investors who like the structure of a REIT to gain exposure to Brookfield Property Partners.

Besides the different tax structure, it offers investors economically identical assets. They both pay the same 7.05% dividend, the same distributions, and offer the same dividend growth rate. You can even exchange BPR shares for BPY shares.

Since BPR is a REIT, there are some advantages for investors they might not get investing in BPY. First, as a REIT, it has to pay 90% of its taxable income to shareholders. Secondly, Because BPR is classified as a U.S. REIT, it also provides bigger tax savings to investors. Investors can deduct up to 20% of their REIT dividends from their income taxes.

That means you can enjoy the benefits of a REIT while also benefiting from one of the best real estate companies in the world.

MarketWatch says BPY has assets across five continents, including North America, that are worth $86 billion. Forty-two percent of these assets are in retail properties like malls, while 41% are in office buildings. Both of these asset types consistently produce between 10% and 12% on annual net returns.

Some of BPY's biggest properties include New York's famous Hudson Yards, Manhattan's former World Financial Center, Brookfield Place, London's Canary Wharf, and Las Vegas' Fashion Show Mall.

Plus, it has a whole slew of big-name retail clientele ranging from Ulta Beauty Inc. (NASDAQ: ULTA) to H&M (OTCMKTS: HNNMY). Heck, even Buffalo Wild Wings, Cheesecake Factory Inc. (NASDAQ: CAKE), and Chili's owner Brinker International Inc. (NYSE: EAT) all rent out space from BPY.

BPY's remaining 17% of assets all consist of BAM's private real estate funds. And these funds have had an incredibly strong run so far. In fact, they've averaged 20% on annual net returns every year from purchased assets that have been considered undervalued.

While these properties, Brookfield's clientele, and tax savings are certainly impressive, its financials in 2018 were even more inspiring. In fact, BPR's net income was $4.1 billion for year-end 2018.

And just for comparison, Simon Property Group Inc.'s (NYSE: SPG) net income was $2.4 billion despite a market cap of over $51 billion.

Plus, BPR grew its net income 200% between 2015 and 2018. Heck, between 2017 and 2018, its funds from operations (FFO) also grew 29%. And that means its properties' values have gone up as well. Plus, Brookfield has managed to retain 95.3% of its renters.

But it's still undervalued. In fact, BPR's projected 2019 price-to-FFO ratio - the standard way to value a REIT - is just 11. That's 36% below the average's REIT's ratio of 17.1.

But BPR's massive dividend is what makes it the best REIT to buy today. It rewards its investors with a whopping 7.05% dividend yield.

Plus, it has the sort of upside we don't often see in REITs.

BPR shares currently trade for $18.73, and it has a target price range of $27 per share. That's a 44.15% upside over the next 12 months for investors who buy shares today.

But with a VQScore of 4.75, we think this REIT could shoot even higher.

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About the Author

Daniel Smoot is a Baltimore-based editor who helps everyday investors with stock recommendations and analysis. He regularly writes about initial public offerings, technology, and more. He earned a Bachelor's degree from Towson University.

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