Every investor knows that certainty is hard to find. But it's relatively easy to find opportunities where money is moving. As 2024 comes to a close, you should be looking towards dividend-paying stocks and real estate stocks. And you get both with real estate investment trusts (REITs).
Real estate investment trusts are companies that own, run, or finance residential and/or commercial properties. Investors can own shares of these companies without having to own actual real estate. Plus, the cash that these companies generate allows them to reward shareholders with reliable, high-yield dividends.
Why REITs right now? Because the Federal Reserve is expected to begin cutting interest rates. That will make some fixed-rate investments look less attractive and make the case for owning quality dividend stocks. And since lower interest rates are also expected to jumpstart the real estate market, these stocks are likely to provide stock price appreciation.
In this special presentation, we're looking at seven of the best REIT stocks you may want to consider taking advantage of with lower interest rates and a resurgent real estate market.
Quick Links
- Equinix
- Prologis
- American Tower
- Welltower
- Public Storage
- Realty Income
- Sun Communities
#1 - Equinix (NASDAQ:EQIX)
Equinix (NASDAQ: EQIX) is the world’s largest digital infrastructure company. That’s a technical way of saying the company is one of the biggest owners of data centers. These are facilities that securely connect networks and share data traffic.
Data centers have been in high demand since the launch of the internet. And that demand is accelerating as companies race to scale into artificial intelligence (AI) applications.
If you had invested in EQIX stock in 2004, you’d be sitting on a total return of 3,844%. Part of that total return comes from the company’s dividend. The 1.96% yield isn’t considered high yield, but the stock currently pays out over $17 per share on an annualized basis. EQIX stock has delivered a total return of 76.13% in the last five years, but the growth has been slower in the last year.
However, since the company reported earnings in August, analysts have been raising their price targets with Mizuho recently raising its price target on EQIX stock to $971. That's a gain of nearly 10% from the stock’s closing price on September 13, 2023.
About Equinix
Equinix (Nasdaq: EQIX) is the world's digital infrastructure company . Digital leaders harness Equinix's trusted platform to bring together and interconnect foundational infrastructure at software speed. Equinix enables organizations to access all the right places, partners and possibilities to scale with agility, speed the launch of digital services, deliver world-class experiences and multiply their value, while supporting their sustainability goals.
- Current Price
- $860.95
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $883.71 (2.6% Upside)
#2 - Prologis (NYSE:PLD)
Ever since 2020, the words “supply chain” have been seared into every investor’s brain. But more than the words themselves, if they didn’t know already, investors have a deeper understanding of how critical supply chain management is to the companies they invest in.
That’s why you should consider Prologis Inc. (NYSE: PLD), an industrial REIT that describes itself as the leader in logistics real estate.
The company has a solid balance sheet that includes strong cash flow and a high occupancy rate of around 94.6%. Prologis has little floating rate debt so it may not benefit much from rate cuts. But its tenants will. And that’s particularly important because Prologis is expecting to increase its rental rates.
Prologis pays a dividend with a 2.96% yield and has increased it for 11 consecutive years. At this time, shareholders receive $3.84 per share on an annualized basis.
About Prologis
Prologis, Inc is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. At March 31, 2024, the company owned or had investments in, on a wholly owned basis or through co-investment ventures, properties and development projects expected to total approximately 1.2 billion square feet (115 million square meters) in 19 countries.
Read More - Current Price
- $127.05
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $133.35 (5.0% Upside)
#3 - American Tower (NYSE:AMT)
American Tower (NYSE: AMT) is one of the largest owners and developers of mobile communication towers and data center facilities. The company has been integral in the worldwide expansion of a 5G network.
AMT stock has delivered a total return of just 22.6% in the last five years. And much of that growth has come from the company’s dividend which has an average annualized return of over 12% in the last three years and currently pays out $6.48 per share annually.
But if you zoom out to 10 or 20 years, you see much more impressive annualized growth. Is that growth likely to return? Here’s why the company believes it will.
Most Americans take 5G connectivity for granted, but that’s not the case in every area. Mobile data demand is growing, and there is still an unmet need in the United States. And when you account for the company’s global footprint and the expansion of mobile data use in emerging markets, AMT will continue to generate consistent revenue in addition to having a long runway for growth.
About American Tower
American Tower, one of the largest global REITs, is a leading independent owner, operator and developer of multitenant communications real estate with a portfolio of over 224,000 communications sites and a highly interconnected footprint of U.S. data center facilities.
- Current Price
- $235.95
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $233.29 (1.1% Downside)
#4 - Welltower (NYSE:WELL)
Healthcare, and particularly senior healthcare, is another megatrend that will be an important driver of investment in REITs. The sobering fact is that the United States is rapidly facing an unprecedented demand for senior care. And right now, there is not enough supply to meet that need.
That's where Welltower Inc. (NYSE: WELL) comes in. The company focuses on providing real estate capital to construct and maintain senior living facilities, including post-acute care providers (step-down facilities) and health systems. It would certainly benefit from lower interest rates as it looks to expand its portfolio.
However, with WELL stock up 59% in the last 12 months, there is some concern that it has several rate cuts priced in. That could be true, but several analysts have been boosting their price targets since the company last reported earnings in July. And even if you have to wait, the company just increased its dividend by approximately 10%, which was the first such increase since it cut the dividend in 2020.
About Welltower
Welltower Inc (NYSE:WELL), a REIT and S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. Welltower invests with leading seniors housing operators, post-acute providers and health systems to fund the real estate and infrastructure needed to scale innovative care delivery models and improve people's wellness and overall health care experience.
Read More - Current Price
- $127.66
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 10 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $112.38 (12.0% Downside)
#5 - Public Storage (NYSE:PSA)
Self-storage facilities aren’t a sexy way to invest. But a 32% growth in stock price in the last 12 months and a total return of over 20% in 2024 is pretty attractive to investors in Public Storage (NYSE: PSA). The company develops, owns, and operates self-storage facilities and is the world’s fourth-largest REIT by market capitalization, controlling approximately 10% of the U.S. market share.
One of the best opportunities to invest in Public Storage came in 2020 and 2021 during the Great Relocation. The stock has quieted down since, but in 2024, growth is starting to accelerate. One of those reasons could be that some people who had been living by themselves are no longer doing so and need a place for their belongings. Another may be that investors are expecting the housing market to reaccelerate with rate cuts.
Of the stocks on this list, Public Storage has one of the most attractive dividend yields at 3.34% and an annualized payout of $12 per share.
About Public Storage
Public Storage, a member of the S&P 500 and FT Global 500, is a REIT that primarily acquires, develops, owns, and operates self-storage facilities. At December 31, 2023, we had: (i) interests in 3,044 self-storage facilities located in 40 states with approximately 218 million net rentable square feet in the United States and (ii) a 35% common equity interest in Shurgard Self Storage Limited (Euronext Brussels: SHUR), which owned 275 self-storage facilities located in seven Western European nations with approximately 15 million net rentable square feet operated under the Shurgard brand.
Read More - Current Price
- $360.72
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $332.71 (7.8% Downside)
#6 - Realty Income (NYSE:O)
Some investors may be surprised to see that it’s taken me this long to get to Realty Income Inc. (NYSE: O). The company is considered one of the best REITs to own in any market environment. A key reason for that is the company’s focus on tenants such as Dollar General Corp. (NYSE: DG) and Walmart Inc. (NYSE: WMT). This ensures a steady stream of revenue with little turnover.
That revenue also supports the company’s high-yield dividend, which has a yield of over 5% and has increased for 32 consecutive years. The commercial real estate market has been a challenge in the last five years, and that’s reflected in the total return on O stock of 9.78%.
The question is if you believe the last five years are an outlier or the beginning of a larger shift. Lower interest rates should ease the burden on its tenants, which makes it more likely than less that Realty Income is headed for accelerated growth.
About Realty Income
Realty Income, The Monthly Dividend Company, is an S&P 500 company and member of the S&P 500 Dividend Aristocrats index. We invest in people and places to deliver dependable monthly dividends that increase over time. The company is structured as a real estate investment trust ("REIT"), and its monthly dividends are supported by the cash flow from over 15,450 real estate properties (including properties acquired in the Spirit merger in January 2024) primarily owned under long-term net lease agreements with commercial clients.
Read More - Current Price
- $62.17
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 9 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $62.59 (0.7% Upside)
#7 - Sun Communities (NYSE:SUI)
Sun Communities Inc. (NYSE: SUI) is a leader in manufactured mobile home communities. SUI stock is up more than 19% and with good reason. This is an asset class that is growing in popularity with two key demographics: first-time home buyers on one end of the spectrum and senior citizens on the other. The former is not only looking at manufactured homes for their price but also as a way to reduce their environmental footprint.
To begin with many of these homes feature modern appliances and amenities like tennis courts and swimming pools that you might find at high-end apartment complexes. But you get the ability to buy or rent your own home with more privacy and space than you’d have.
And in 2024, the ability to get all of that at an affordable price is a key selling point. Lower interest rates may bring mortgage rates down a little, but for many buyers a first home will be out of reach.
About Sun Communities
Established in 1975, Sun Communities, Inc became a publicly owned corporation in December 1993. The Company is a fully integrated REIT listed on the New York Stock Exchange under the symbol: SUI. As of December 31, 2023, the Company owned, operated, or had an interest in a portfolio of 667 developed MH, RV and Marina properties comprising 179,310 developed sites and approximately 48,030 wet slips and dry storage spaces in the U.S., the UK and Canada.
- Current Price
- $143.08
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 5 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $138.09 (3.5% Downside)
In real estate, homebuyers understand that location matters. As you can see from the seven stocks in this presentation, the same is true for real estate investment trusts. Some commercial real estate projects, notably office buildings, are likely to remain under pressure.
But even if you don't believe in the idea of a soft landing, you can't deny that there are some sectors of the economy that are doing well. Those sectors also have underlying trends such as artificial intelligence, the aging of America, and the need for more affordable housing for all Americans.
That's reflected in the REITs in this group of stocks. MarketBeat provides investors with a list of the top 100 REITs by market capitalization as a free tool on MarketBeat.com. This is a great way to start building your watchlist, and some of these names may even become core stocks in your portfolio regardless of your investment philosophy.
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