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Between the pandemic, shutdowns, and the market volatility it all caused, investors have been pouring money into stable income-producing investments like real estate investment trusts (REITs). But not all REITs are equal, so we'll show you the three REITs to buy today.
REITs were thumped in the early stages of the coronavirus economic shutdown. While the game has changed – perhaps permanently – for sectors like shopping malls, hotels, and some office properties, there are segments of the REIT market that will do just fine. More than fine, actually.
In fact, they should prosper and grow as the economy reopens in the months ahead. Investors who use this opportunity to load up on these shares could be looking at massive gains over the next several years.
This includes some retail REITs that are being overlooked by the market right now.
REIT to Buy, No. 3: Realty Income
Realty Income Corp. (NYSE: O) has been a top-performing REIT since its first listing on the stock exchange back in 1994.
Since then, Realty Income shares have returned an average of 14.6%, easily outpacing the S&P 500, which gained just about 10% over the same span. The company now has a market capitalization of over $18 billion.
Realty Income has been one of the steadiest performers among all REITs. It has an unmatched track record of growing profits as it has increased earnings 23 of the last 24 years. While it had a slight decline in 2008 as the financial crisis hammered the economy, profits surged higher in 2009 and have continued to grow.
Realty Income pays monthly dividends, so it is a fantastic income stock. The shares currently yield over 5%. The REIT has paid 598 consecutive monthly dividends, and there have been 106 dividend increases since the 1994 IPO. The dividend has grown by an average of 14% since the IPO, so it has been a great dividend stock for long-term owners. The payout has been so consistent that Realty Income is included in the S&P 500 Dividend Aristocrats index.
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Realty Income leases more than 6,500 properties to 630 different tenants in the United States, Puerto Rico, and the United Kingdom. While many of the tenants are retail companies, these are free-standing buildings with grocery stores like Kroger Co. (NYSE: KR) as well as Walmart Inc. (NYSE: WMT) and Sam's Club locations. Its largest tenant group is pharmacy chains like Walgreens Boots Alliance Inc. (NYSE: WBA) and CVS Health Corp. (NYSE: CVS), which have not missed a beat in the current economic shutdown.
The occupancy rate is over 98%, and I don't expect that to fall much in the COVID-19 pandemic economy.
REIT to Buy, No. 2: Regency Centers
Regency Centers Corp. (NYSE: REG) should also come out of the crisis in solid shape.
Regency owns a high-quality portfolio of open-air shopping centers that are 80% grocery-anchored. Many of its other tenants are also essential businesses, including pharmacies, liquor stores, and hardware stores. Regency owns a total of 419 centers, all of which are located in affluent, densely populated areas.
Regency also had its IPO back in 1994. While not by as steep a margin as Realty Income, Regency Centers has also outperformed the stock market since the IPO with an annual average total return of 11%.
Shares of Regency Centers currently yield almost 6%. They have a strong track record of raising the dividend, with the payout growing by about 4% annually on average.
Regency has an occupancy rate of 95.5%. With healthy grocers like Publix and Whole Foods taking up most of the space, this REIT should not see too much decrease in occupancy. Pharmacies and liquor stores are not going to be closing, nor will restaurants like Starbucks Corp. (NASDAQ: SBUX) and Chick-Fil-A that are large tenants at Regency Centers Properties.
But my next REIT to buy isn't dealing with shopping centers or retail locations. It's a play on the new need to keep data and technology secure.
And it's going to be even more essential as the economy continues to shift in a digital direction…
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.