2023 has been quite a tough year for the real estate industry as it has been the worst-performing sector to date. But given the latest run of the market, the real estate industry as a whole family has been in the positive territory majorly due to the drastically underperforming S&P 500.
A major reason for the underperformance here is the rising interest rate. Fed never previously hiked the normal cycle rate like it did recently. The REIT industry relies on debt to acquire more real estate shaping the fundamentals of how REITs work. However, due to the decreasing inflation and rising rate, investors are looking for the Federal Reserve to reduce interest rates. REITs are starting to get higher.
Knowing this and all the punishments REITs have taken in the past 18 months, you can still pick it as a high-quality area investment. In the coming year, it might turn out to be fruitful for you. So, if you are looking to invest in REIT, then here are the top 10 options you can consider next year.
Top 6 REITs for 2024
1. Realty Income Corporation
Let’s start by talking about the best available REIT for investment in 2024. It is a favourite amongst many retail investors and institutional investors.
You must know Realty Income coined themselves as the monthly dividend company. It is entirely based on a dividend they pay out to the investors every single month.
As of now, Realty Income operates with a net lease REIT that comes with a market cap of $39 billion, and over the past 12 months, the rate has fallen 16%.
But the good news is Realty Income has a portfolio of more than 13,250 properties, a number that will increase in the future as they choose to close the pending acquisition of Spirit Realty Capital Inc.
Realty Income, no doubt, currently is a retail REIT. The sector accounts for about 83% of the base rent annually, and the next largest sector, industrial, is at 13% percent.
Also, there is 3% of gaming. This clearly indicates a very good opportunity to make an investment and have great returns from it.
2. VICI Properties Inc
Who hasn’t heard about VICI properties? They are the largest landlord on the Las Vegas trip. VICO has only been public for the last few years.
Although it is a new REIT, the company still has a market cap rate of $32 billion, and over the last 12 months, the shares of VICI are down nearly 10%. They indeed have some high-quality assets, including New York New York, The Mirage, MGM Grand, and others.
It is thus quite evident that REIT works finest with casino operators and hospitality. Also, the quality here is evidence-based.
You must know this REIT had a 100% collection rate throughout the pandemic, a time when most of the REITs saw a collection rate of just 50%.
Considering the dividend VICI has paid every year, they have successfully managed to gain the attention of the investors. They now yield a dividend of 5.4%, but they also promise strong dividend growth with an average growth rate of 17%.
So, if you wish to get your hands on real estate in the hospitality industry, an investment here will be quite fruitful for you.
3. Agree Realty Corporation
It is an old REIT that can be seen as a sibling to Realty Income. They both operate as net lease REITs within the retail sector. Actually, both the REITs went public in 1994. Agree Realty, as of now, has a market cap rate of $6 billion, which is much less than Realty Income.
In fact, over the last 12 months, shares of ADC have fallen nearly 20%, but the positive aspect here is that the total shareholder return has been 26% over the past five years. In fact, they have generated an 11.3% compounded average total since going public in 1994.
When talking about the dividend, ADC has been growing its dividend every year since 2021. The current dividend yields at 5.0%. The company’s portfolio boasts three major sectors, including home improvement, grocery, and auto service.
At the same time, the top 3 tenants of the company include Walmart Inc., Dollar Generation Corporation, and Tractor Supply Company. Given how well their portfolio is established, an investment in this REIT can be the best decision for your upcoming year.
4. Prologis, Inc
They are the largest warehouse and industrial REIT. They are an indirect way to play the future growth in ecommerce. PLD currently has a market cap rate of $112 billion, and over the last 12 months, the stock has remained relatively flat. Just like mentioned earlier, PLD can be a great way to ensure growth and ecommerce.
Most people mainly consider ecommerce like Amazon, Shopify, etc. But they are the ones who have to make the sales. You can play the real estate side of things as those companies or the sellers need by fulfilling their storage requirements.
As of now, the ecommerce sale equals less than 25% of the retail sales, but it is growing every year. Ecommerce uses 3x as much logistics space as regular retailers, which can be quite beneficial, especially if you are choosing this REIT.
The company continues to see solid demand and earning results across the sector. It pays an annual dividend of $3.48 post share, which equates to a dividend yield of 2.9%.
Besides, the last five-year dividend growth of the company accounts for 12.5%, with nine consecutive years of dividend growth.
Considering all the positive factors here no doubt the company is ready to offer you a great chance for growth.
5. Alexandria Real Estate Equities Inc
It indeed has been quite an interesting REIT and even the one that has been misunderstood the most in terms of size. As of now, Alexandria has a market cap rate of $21 billion, and over the last 12 months, the shares of ARE have been down to 20%. However, they are also up 20%. So things can be a lot worse.
Although many people consider REIT as an office REIT, it is anything but traditional.
Office REITs have been far away reverse sector within real estate in 2023 due to high interest rates. But importantly, there has been a change in the working board with flexible work arrangements.
Lucky for you, Alexandria caters to the biotech and pharmaceutical sector, which differs greatly. In addition, ARE has several medical camp properties. Given how the demand for the research basis is growing, your investment here can turn out to be great.
6. Extra Space Storage Inc
One thing is for sure Americans know how to play it right in the hands of self-storage companies like Extra Space Storage, and this is not changing anytime soon. Extra Storage Space is one of the largest self-storage REITs in the US market.
The REIT on the market today accounts for a market cap rate of $30 billion compared to Public Storage, which just has a market cap of $48 billion. Over the last few years shares of EXR are down by 12%.
Extra Space has about 3651 properties, amounting to 2.5 million storage units. This amasss more than 279 million square feet of rentable space.
Storage undoubtedly has proven itself to be recession-proof over the last few years. This is why considering an investment here will turn out to be extra beneficial for you. Dividend growth, on the other hand, has been a priority for the management over the years.
Thus the growth has outpaced its closest competitors by a wide margin over the last few decades. The dividend currently yields at about 4.7%, with the dividend doubling over the last five years.
So now, if you are looking for a recession-proof property, then considering an investment in this REIT will be the best. With an investment here, you will have better stability and growth. It works great for diversifying the portfolio.
Take your chance today and look for the right options mentioned above in the list. But do not hesitate to compare and do thorough research before making any investment. It is the key to guarantee you put your money in the right place and get maximum benefits from it.
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