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While the media has focused solely on the demise of commercial real estate during the COVID-19 crisis, some sectors will see a boost in the aftermath of the economic shutdown.
First, e-commerce will expand in the years ahead, which will keep the economy growing. While it is indeed horrible news for mall owners, it is good news for the owners of warehouses and distribution centers that service e-commerce.
Industrial REITs own precisely that type of property and should survive the crisis and thrive for decades on the other side of it all.
Today, we're looking at the three best REITs to buy in this space for May.
Best REITs to Buy in May, No. 3
While many real estate sectors struggled in the first quarter, industrial real estate properties saw their lowest vacancy rate in years. Rents for industrial properties rose year over year and quarter over quarter during the first three months of the year.
Stag Industrial Inc. (NYSE: STAG) owns 450 buildings in 38 states, with approximately 91.4 million rentable square feet. Of those buildings, 365 are warehouse and distribution space, the type used by e-commerce firms. Amazon.com Inc. (NASDAQ: AMZN) is its largest tenant. The U.S. Government General Services Administration is the second largest. Airfreight services like DHL, FedEx Corp. (NYSE: FDX), and XPO Logistics Inc. (NYSE: XPO) are also significant tenants of this industrial REIT.
Stag is laser-focused on credit-checking its tenants before closing a lease on one of its single-tenant industrial properties. It has a team of four credit specialists on staff, three of whom hold Certified Financial Analyst charters. Single-tenant properties tend to be larger companies, and this is reflected in Stag's tenants. Sixty-one percent of its tenants have revenue of more than $1 billion, and 86% have revenues of greater than $100 million. These are companies that should have the financial strength to keep paying the rent during downtimes in the economy.
Stag pays a monthly dividend, and the payout after the recent decline in the REIT market is now 5.34%. Stag has raised the payout every year since 2013.
Best REITs to Buy in May, No. 2
Plymouth Industrial REIT Inc. (NYSE: PLYM) owns both single- and multi-tenant industrial properties across the United States. It prefers to own and manage Class B industrial properties in smaller cities and towns across the United States.
Management is looking to grow in markets like Cincinnati, Columbus, and Cleveland, as well as Atlanta, Memphis, and locations in Indiana. They are also expanding their presence in the Jacksonville market.
Warehouse and distribution companies currently occupy almost 40% of Plymouth's properties right now. Manufacturing and warehouse companies are an additional 31% of the tenant base. Plymouth had a 96% occupancy rate at the end of 2019, and I do not expect to see that change very much in the next couple of quarterly reports as the economy begins to recover.
After the drop in REITs during the past quarter, Plymouth shares have fallen by more than 20%. At the current price, the REIT is yielding right around 10%, so this is an excellent income play in addition to the growth of the industrial sector that is going to occur over the next several years.
Now, here's our top REIT to buy for the month of May...
The Single Best REIT to Buy Now
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We have seen a shift in the way people shop for groceries during this pandemic and economic shutdown.
People are ordering for delivery or pickup outside the store. Many think this shift will be permanent for a lot of customers, and this is going to create enormous demand for cold storage in the United States and around the world.
AmeriCold Realty Trust (NYSE: COLD) is the world's largest publicly traded REIT focused on the ownership, operation, acquisition, and development of temperature-controlled warehouses.
It owns over 1 billion refrigerated cubic feet of storage in the United States, Australia, New Zealand, Canada, and Argentina. With 178 warehouses under its management, it owns 27% of U.S. market share in the refrigerated warehouse segment. Outside of the U.S., it owns 5% of the global cold storage real estate.
This is a growth story. Americold has been growing by 20% a year since its 2018 IPO and the change in shopping habits around the world. After falling 11% so far this year, the stock currently yields 2.6%, and that payout should grow in the years ahead as well.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.