The stock market’s strong run over the past few years brought attention to high-flying growth stocks, usually from the technology sector, that were consistently outpacing the market. However, fresh volatility within the last few months has shifted the focus back towards other investment strategies, and now it might be time for investors to check out things like real estate investment trusts, or REITs.
REITs are companies that own, operate, or finance real estate properties that produce income, such as apartment complexes or retail locations. These companies are heavily regulated and must meet a number of qualifications to be classified as a REIT, but they do offer investors a few distinct advantages.
First of all, real estate can be a very profitable investment sector when certain economic conditions are present. What’s more, REITs must pay at least 90% of their taxable income in dividends to shareholders, so they are a great option for income investors looking for steady payouts.
Luckily for Zacks readers, the proven Zacks Rank—which emphasizes earnings estimates and estimate revisions—works with REITs just as it would with any other company. The strongest REITs are going to be those with improving outlooks and great Zacks Ranks.
With that said, check out the REITs that are model says are impressive options right now:
1. New Residential Investment Corp. (NRZ)
New Residential is a mortgage REIT focused on the residential real estate market. The company deals primarily with mortgage servicing rights (MSRs), having pioneered investments in so-called Excess MSRs—which enable it to collect monthly cash flows without assuming some servicing duties, advance obligations, or liabilities.
NRZ is a Zacks Rank #2 (Buy) and offers a dividend yield of about 10.7%. The stock is also an interesting value play, with shares trading at just 8.5x forward earnings. The company’s P/B ratio of 1.1 is also in an attractive territory. The firm has also put together a solid earnings beat streak and watched its 2018 outlook improve significantly. Shares have since been testing a new 52-week high.
2. Ladder Capital Corp. (LADR)
Ladder Capital is a commercial real estate finance company. The company focuses on midmarket senior secured commercial first mortgage loans, securities backed by first mortgage commercial loans, and investing in net leased and other commercial real estate. Ladder Capital also provides some services to the commercial real estate industry.
LADR is currently sporting a Zacks Rank #1 (Strong Buy). Its dividend yield is about 8.1% right now, and the company has steadily raised its quarterly dividend from 28 cents to 33 cents per share over the past two years.
Meanwhile, the stock is a decent growth option, with earnings and revenue both expected to improve about 12% this fiscal year. LADR trades at just 9.3x forward earnings and has a PEG ratio of 1.9.
3. Chatham Lodging Trust (CLDT)
Chatham Lodging Trust is a self-advised hotel REIT, formed to invest in premium-branded upscale extended-stay and select-service hotels. It invests primarily in hotels in large metropolitan markets in the U.S. Its brand investments include Residence Inn by Marriott, Homewood Suites by Hilton and Summerfield Suites by Hyatt, and more.
CLDT has a Zacks Rank #2 (Buy) right now. The stock has a dividend yield of about 6.4%, and the firm has a proven track record of maintaining this payout for many years. This is a small-cap play, but shares have added more than 12% over the trailing three months, and the stock is trending back toward its 52-week high.
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Ladder Capital Corp (LADR) : Free Stock Analysis Report
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Chatham Lodging Trust (REIT) (CLDT) : Free Stock Analysis Report
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