Stocks tumbled once again Wednesday amid increased market volatility as investors and traders begin to worry more about a larger global economic slowdown. Yields on 10-year U.S. Treasury notes hover at roughly 1.58%, as people rush to the safe haven. Yet, with yields so low, now might also be a solid time for investors to consider REITs as a steady source of income.
Real Estate Investment Trusts 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, 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.
The presence of mortgage debt makes this a rate-sensitive industry. But many companies offset this through strong funds from operations (FFO) growth, or they stick out from the pack with large amounts of their debt already fixed at a low rate.
Luckily our proven Zacks Rank, which emphasizes earnings estimates and estimate revisions, works with REITs just as it does with any other company. We prefer to use FFO as the metric of profitability here, but the trends work the same otherwise.
The strongest REITs are going to be those with improving outlooks and great Zacks Ranks. So, let’s check out the REITs that our model says are impressive options right now…
Alexandria Real Estate Equities, Inc. ARE
ARE shares have popped roughly 25% in 2019 to crush the S&P 500’s 15% climb and its industry’s 19% expansion. Alexandria Real Estate Equities owns, operates, and develops collaborative technology and life science campuses mostly in coastal regions of the U.S. The firm focuses on what it calls “innovation clusters,” which includes New York City, Greater Boston, Seattle, San Francisco, and a few other areas. ARE posted stronger-than-projected second quarter results in late July.
Looking ahead, Alexandria’s adjusted third-quarter FFO is projected to pop 5.4% to $1.75 per share, based on our current Zacks Consensus Estimates. The firm’s full-year earnings are projected to jump 5.7%, with fiscal 2020’s bottom-line expected to come in 6.2% higher. Meanwhile, the firm’s Q3 revenue is projected to jump 8.9% to help boost full-year revenue by 11.1% to reach $1.47 billion. The Pasadena, California-headquarter company recently upped its quarterly payout to $1.00 a share. ARE is a Zacks Ranks #2 (Buy) at the moment and boasts a 2.77% dividend yield.
Prologis, Inc. PLD
Prologis is a logistics real estate-focused REIT that leases distribution facilities mostly to retail/online fulfillment and business-to-business clients. The firm operates in growth markets, with high barriers to entry across roughly 19 countries. PLD stock has surged 37% in 2019, which as we might remember, easily tops both the broader market and its industry’s average climb. This jump helps Prologis stock rest near its 52-week high of $83.99 a share that it reached in July.
The San Francisco, California-based company posted better-than-projected Q2 results in mid-July and announced that it signed a definitive merger agreement to acquire Industrial Property Trust for $3.99 billion. Industrial Property’s portfolio includes 236 properties, of which 96% are located in existing Prologis markets. This will help expand PLD’s reach in key markets such as Southern California, Chicago, New Jersey, and other major metro areas. Peeking ahead, Prologis’ adjusted Q3 FFO is projected to jump over 29% to $0.93, with revenue set to climb 17% to $712.3 million. The firm operates in a solid niche within the broader real estate market as delivery and e-commerce expand in the Amazon AMZN age. PLD is also a Zacks Rank #2 (Buy) right now and pays an annualized dividend of $2.12 a share, with a yield of 2.6%.
Camden Property Trust CPT
Camden Property Trust focuses mainly on ownership, management, development, redevelopment, acquisition and construction of multifamily apartment communities. The Houston, Texas-based company owns and operates roughly 165 communities that total over 56,000 apartments around the U.S. from Southern California to Florida. CPT is currently a Zacks Rank #2 (Buy) and reported better-than-projected Q2 results on both the top and bottom-lines on July 25. Camden stock closed regular trading Wednesday at $103.02 a share, not too far off its 52-week highs of $110.42.
Camden shares are up 17% in 2019 and CPT currently boasts the highest dividend yield of the three companies on this list at 3.03%. The firm also pays an annualized dividend of $3.20 a share at the moment. CPT’s full-year FFO is projected to jump 6.5% on 6.6% higher revenue that would see it reach $1.02 billion. Then, in fiscal 2020, Camden’s revenue is projected to climb 4.4% above our currently full-year estimates. This climbed is expected to help lift its bottom line roughly 5% higher than 2019’s projection.
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