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3 REITs for Income Investors to Buy in the Fourth Quarter of 2019

Benjamin Rains

U.S. stocks climbed last Friday after the U.S. and China ended two days of trade negotiations with what President Trump called “phase one” of a trade deal. Chinese officials seemed a bit less optimistic than their U.S. counterparts. Nonetheless, Wall Street and investors appear happy enough with the latest trade war updates.

With that said, investors should remain somewhat cautious and search for more stocks that provide solid income. Clearly, a diversified portfolio is always the best practice. But dividend-paying stocks play an even more vital role in our current low interest rate environment. And REITs are a safe-haven class of dividend-paying stocks that should play a role in most investors’ portfolios.

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. We should note that instead of earnings, REITs report funds from operations or FFO, but investors can view them as essentially the same for our purposes.

Meanwhile, one distinct advantage is that REITs must pay at least 90% of their taxable income in dividends to shareholders. Clearly, this means REITs are great options for income investors

So let’s dive into the three highly-ranked REITs we found using our Zacks Stock Screener…

Store Capital Corp. STOR

Store Capital is an internally managed net-lease real estate investment trust that works in the single-tenant operational space. STOR targets mid-market and larger companies around the U.S., with a portfolio of 2,389 proprieties leased to a total of 456 customers as of the end of last quarter. Store’s “Top 10 Customers,” who account for roughly 18% of annual rent and interest, include the likes of Art Van Furniture, Bass Pro Group, AMC Entertainment AMC, and CWGS Group CWH. Meanwhile, shares of STOR have surged 33% in 2019 to outpace its industry’s 22% climb. Store stock has also climbed 46% in the last two years, and investors should note that Warren Buffett’s Berkshire Hathaway BRK.B took a roughly 10% stake in STOR in 2017.

Despite STOR’s strong run, the firm’s dividend yield rests at 3.72% at the moment, which comes in well above the 10-year U.S. Treasury note’s 1.72%. Our current Zacks Consensus Estimates call for the firm’s fiscal 2019 adjusted AFFO to climb 3.3% on the back of 21.4% revenue expansion. Looking ahead, Store’s FY2020 sales are expected to jump 10.2% higher to help lift its bottom line by an additional 7%. STOR’s positive earnings estimate revision activity helps it earn a Zacks Rank #2 (Buy) at the moment. Store is also part of a REIT and Equity Trust industry that sits in the top 34% of our 255 Zacks industries. The firm is set to release its Q3 2019 financial results on October 31.

Americold Realty Trust COLD

As its name might suggest, Americold is a REIT focused on the operation and development of temperature-controlled warehouses and currently own and operates 178 warehouses across the U.S., New Zealand, Australia, Canada, and Argentina. The Atlanta, Georgia-based company, which works with food producers, processors, distributors, and retailers, has seen its stock price soar 46% in 2019 and skyrocket 100% since it went public in January of 2018. COLD also currently pays an annualized dividend of $0.80 per share, which helps it sport a 2.14% yield.

Americold’s impressive run since going public has caused its valuation picture to appear somewhat stretched. Nonetheless, COLD’s positive earnings estimate revisions help it earn a Zacks Rank #1 (Strong Buy) right now. The company is also expected to see its Q3 revenue climb 17.5% to help lift its adjusted FFO by 14.3%. Meanwhile, Americold’s full-year fiscal 2019 AFFO is projected to pop 9.3% on nearly 12% stronger sales. The company is then expected to post 14.6% better bottom-line results on over 9% higher revenue that would see it reach $1.96 billion in 2020.

Starwood Property Trust STWD

Starwood Property Trust is an affiliate of global private investment firm Starwood Capital Group. The Greenwich, Connecticut-based company is diversified across real estate and infrastructure from hotels and retail to office and industrial space. STWD currently holds a market cap of $6.8 billion and pays an annualized dividend of $1.92 per share, for a whopping 7.92% yield. And this payout isn’t artificially inflated by a falling stock price. STWD stock is up 23% in 2019 and 12% in the last two years to outpace its industry’s 7% average climb.

Looking ahead, Starwood Property Trust’s adjusted earnings are projected to slip 1.9% this quarter and 12.8% in fiscal 2019. Luckily, its bottom-line is projected to bounce back over 13% next year to roughly match 2018’s strength. Plus, the company’s sales are expected to climb 16.3% both in Q3 and for the full fiscal year, with 2020 projected to come in 9.6% higher at $1.41 billion. Starwood Property Trust is scheduled to release its Q319 financial results on November 8. Overall, STWD is a Zacks Rank #2 (Buy) that appears to be worth considering right now for income investors.

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