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Best REIT Stocks: Our Top Picks in Every Sector

Larry Davidson - November 05, 2019

best REIT stocks

In a low-rate environment, real-estate investment trusts (REITs) start to look attractive. REITs trade on the open stock market, so there are few barriers for traders who want to start investing. These assets offer some of the highest yields on the market, with many paying out over 5%. Most REITs center around a particular category of real estate.

Since these companies get most of their earnings from rent payments, their businesses tend to be remarkably stable. However, don’t underestimate how much REITs can fluctuate. While these assets tend to be less volatile than traditional stocks, prices can still move drastically over time. Once they understand the associated risks, yield-seeking investors should watch these high-yield REITs.

American Tower Corp. (AMT)

Cell Phone Towers

American Tower Corp. was one of the hottest plays on 5G this year. This firm owns cell phone towers and other telecommunication infrastructure, and It leases its properties to providers like AT&T (T) and Verizon (VZ). This one started rallying early in the year, as traders anticipated big infrastructure spending from telecom companies building out their 5G networks.

Currently, this REIT isn’t yielding very much because its had such a good year. Share prices are up 41% over the past 52 weeks and that’s a pretty spectacular performance for a REIT.

Annual Dividend Yield: 1.75%

Prologis Inc. (PLD)


This is one of the leading warehouse REIT stocks on the market. This company owns and leases warehouse space and – in case you haven’t heard – warehouses are the hottest properties in real-estate this year. Companies are spending big to bolster their e-commerce business, and a large part of that spending is going into last-mile delivery centers near major metropolitan areas. As a result, warehouse property is in high demand, and the outlook for the future remains strong.

Growth potential is high for this stock but, as a result, yields are aren’t as high as some of the other high-yield REITs. However, this company’s growth seems pretty stable and there is a good chance that shareholders will get solid gains to go along with their dividend payments

Annual Dividend Yield: 2.42%

spg reit stocks
Many experts believe shopping malls are going extinct, but long-term investors might see an opportunity for these down-and-out assets. Above: Simon Property Group is one of the largest shopping mall owners in the U.S.

Simon Property Group Inc. (SPG)

Retail Space / Malls

If this name sounds familiar, you’ve probably seen it somewhere at your local mall. This company has a vast portfolio of large indoor malls across the U.S. However, the outlook for these types of properties is not great, so this stock hasn’t performed well over the past year. It’s in the midst of a long-term down that began about 12 months ago. Shares are down over 15% this year.

Smart investors don’t always go with the crowd. If you think the ‘mall massacre’ fears are overblown, you can get in this one for cheap. At the very least, the company is financially stable and pays a decent dividend.

Annual Dividend Yield: 5.56%

Hotel REITs can be a great option for playing a booming consumer economy. Above: The St. Regis Hotel in Dubai. St. Regis rents some of its properties from HST.

Host Hotels and Resorts Inc. (HST)

Luxury Hotels

This company owns high-class hotels and resort properties across the U.S., along with five international properties. It leases its properties to classy hotel operators like Ritz-Carlton, St. Regis, and more. It has 83 properties across 50 major markets. Hotel REIT stocks are a popular way to play

Value investors will appreciate Host’s discounted P/E and high dividend. HST is down over 10% for the year, but earnings are projected to grow in the second quarter and the dividend yield is attractive.

Annual Dividend Yield: 4.80%

Senior Housing Property Trust (SNH)

Healthcare / Senior Housing

Healthcare REIT stocks usually center around hospitals, but Senior Housing is a specialized play on the senior housing market. The company owns medical offices, senior living communities, and wellness centers throughout the U.S. America’s baby boomers are aging and experts expect there will be a huge influx of demand for senior housing. Many real estate investors believe that senior housing will be one of the hottest corners of the market in the near future.

Despite the sunny outlook, this company has its issues. This firm is having problems turning a profit. The company posted negative earnings in two of the last three quarters, and share prices nosedived as a result of the misses. However, the declines make this REIT more attractive for long-term value investors.

Annual Dividend Yield: 6.05%

Self-storage is in high demand amongst Millenials and other younger Americans. Above: A Public Storage facility.

Public Storage (PSA)

Self Storage

Americans like to buy stuff and many are renting extra space to store their accumulated treasures. The outlook is strong for self-storage companies, and Public Storage is one of the leading companies in the industry. Demand for storage space remains strong in the U.S., especially among Millennials.

Public Storage pulled back in September, and its been trending downward ever since. It might not be the best time to pull the trigger on this one, but keep an eye on it for signs that the trend might be turning positive.

Annual Dividend Yield: 3.58%

More Hot Stocks

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One way investors can diversify their portfolio and collect income is by buying REIT stocks. REIT stands for ‘real estate investment trust’. These types of companies own and operate income-producing real estate or other related real estate assets.

In other words, this type of investment gives individuals an opportunity to profit from commercial real estate ownership, without actually owning the property.

Of course, for a company to be classified as a REIT, it must meet several criteria.

Qualifying As A REIT Stock

The firm must invest at least 75 percent of its total assets in real estate assets and cash. In addition, it must derive at least 75 percent of its gross income from real estate related sources, including rents from real property and interest on mortgages financing real estate property.

REIT stocks must distribute at least 90% of its taxable income to shareholders annually in the form of dividends.

In addition, REIT stocks must be:

  • Taxable as a corporation
  • Have no more than 50% of its shares held by five or fewer individuals during the last half of the taxable year
  • Derive at least 95% of its gross income from real estate activities and dividends or interest from any source
  • Have no more than 25% of its assets consist of non-qualifying securities or stock in taxable REIT subsidiaries.

Types Of REIT Stocks

Equity REITs

Equity REITs own properties and charge rent to generate revenues. These organizations engage in various types of real-estate-related activities, including property management, renovation, and property flipping. Revenues can be generated through rental properties or capital gains. Equity REITs invest in various types of real estate, including hotels, residential, industrial, commercial and retail.

Nariet REIT Stocks
Key statistics about the real estate investment trust (REIT) sector.

Mortgage REITs

These types of REIT stocks are back by mortgages and mortgage-backed securities. Mortgage REITs generate revenues through interest income on mortgages. You may remember that mortgage-backed securities played a leading role in the 2009 Financial Crisis. However, don’t be shy about investing in mortgage REITs. Regulators closed most of the loopholes that contributed to the ’09 Crisis

Hybrid REITs

The best of both worlds. These REITs combine an equity REIT and mortgage REIT. These companies generate revenues from investing in real estate and mortgage loans / mortgage-backed securities.

Best Mortgage REIT Stocks

These REITs own mortgages and mortgage-backed securities. They generate most of their revenues through interest payments.

Annaly Capital Management REIT (NYSE: NLY) – 

The firm invests in and finances residential and commercial assets. In addition, Annaly invests in mortgage-backed securities and similar derivatives to hedge its investments.

The company uses its capital and other structured financing products to invest in assets in both commercial and residential markets, earning the spread between the yield on its investments and the cost incurred from borrowing and hedging.

Annaly has a market cap that exceeds $12B. The firm also offers investors an annual dividend of $1.20 per share.

AGNC Investment REIT Corp (NYSE: AGNC) – 

An internally managed REIT that invests in residential mortgages through leveraged investments. Financing is structured as repurchase agreements.

The firm has a market cap of more than $7B and offers investors an annual dividend of $2.16 per share.

New Residential Investment REIT (NYSE: NRZ)

The firm invests in, and actively manages assets related to residential real estate. It invests in excess mortgage servicing rights on residential mortgage loans, and in servicer advances, including the basic fee component of the related mortgage servicing rights.

A mortgage servicing right provides a mortgage service with the right to service a pool of mortgage loans in exchange for a fee. The company believes it has an edge due to its capital, experience, and business relationships to take advantage of market conditions caused after the financial crises.

The firm has a market cap of more than $5B and gives investors an annual dividend of $2 per share.

Risks Involved Trading REIT Stocks

During the financial crisis in 2009, REIT stocks got slammed. Mortgage-backed securities helped cause the crisis, so equity REITS lost approximately 50% of their value during the fiasco. In fact, many REIT stocks were trading for below book value.

Before investing in REITs, it’s important to monitor the health of the real estate market. Consider the types of properties the company holds and whether the market for those properties is strong enough to warrant an investment.

Using Economic Indicators to Trade REIT Stocks

Investors can use economic indicators to gauge the health of the market. The housing starts report counts the number of new residential construction projects, and it can be a good benchmark for judging the strength of the homebuilding market. The consumer sentiment survey is also helpful because it analyzes consumer buying habits.

Some of these REIT stocks invest in commercial and retail property. If the economy is booming, its more likely that people visit malls, go out and shop. However, during tough economic times, consumers become more conservative and spend less money. This can affect occupancy rates, as well as property rents.

How Do Interest Rates Affect the Real Estate Market?

Traders also need to be aware of Federal interest rate policies. The Federal Reserve can have a huge impact on the housing sector. Generally, lower rates create more demand for homes because they allow for cheaper mortgages rates. In addition, lower rates make it harder for investors to generate yields with U.S. Treasury bonds

In addition, when interest rates rise borrowing becomes more expensive. This has the potential to slow down the commercial real estate market. Of course, when interest rates drop, money becomes cheaper to borrow.

Bottom Line On REIT Stocks

During the financial crisis of 2008, REIT stocks got crushed. After that, the Federal Reserve Bank decided to cut interest rates, making money cheaper to borrow. This low-interest rate policy allowed for the real estate market to make a comeback.

Using REITs, investors can buy the real estate market without investing in physical property. In addition, income investors can generate higher yields using REITs. REITs trade like stocks, so they are very liquid assets that investors can shuffle around easily.

If you’re looking for exposure to the real estate sector but you don’t have the budget for a property, REIT stocks could be the way to go. These securities often yield much more than bonds, so they’re great for income investors too. You can start your search for the best REIT stocks with our top picks. However, always remember to do your own due diligence and consult with a financial advisor before making any significant investments.

Larry D. is one of the most experienced writers at the Dork. His expert insights into the individual stocks have made small fortunes for some of his readers and profitable trades for many more. Best known for his work with under-the-radar growth stocks, Larry has been picking winners for over 30 years.

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