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The 5 Best Real Estate Stocks to Buy Now

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·6 min read
In this article:
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  • These five real estate stocks to buy combine value and growth to hedge against high inflation as sales conditions in the U.S. housing market remain strong.

  • Ready Capital (RC): This company trades at an 8.5% discount to its book value per share with a dividend yield of 11.65%.

  • MFA Financial (MFA): Very strong Q1 2022 earnings and revenue support the current stock price.

  • AFC Gamma (AFCG): This company beat Q1 2022 earnings and revenue estimates and has a dividend yield of 12.91%.

  • AG Mortgage Investment Trust (MITT): MITT trades at a discount of 44% to its book value per share.

  • Sachem Capital (SACH): Trading near its 52-week low, this company represents a great investment opportunity with an 80.3% increase in revenue in Q1 2022.

Real estate agent handing over a house key, desktop with tools, wood swatches and computer on background, top view. Real estate stocks.
Real estate agent handing over a house key, desktop with tools, wood swatches and computer on background, top view. Real estate stocks.

Source: Stock-Asso / Shutterstock

Real estate, I believe, is a sector that shouldn’t be correlated with the stock market and the bond market, as it is a different asset class. After the 2008 financial crisis that fueled a housing bubble, things seem to have changed a lot. The real estate market is strong and resilient in the U.S. Investing in real estate is a good choice as almost everything from equities to the cryptocurrency market has been under selling pressure in 2022. Real estate is more of a necessity than pure speculation.

People need to buy homes, relocate, and leave a legacy for their children. Real estate offers diversification in a well-balanced portfolio, cash flows, and potential for capital appreciation. Additionally, investing in real estate stocks may help your retirement goals, as well. In these moments of high volatility in the capital markets, this list of real estate stocks to buy is based on safety. I focused on real estate investment trusts (REITs) that pay attractive dividend yields, acting as a safety net to any further stock decline. Additionally, they can be an inflation hedge and a tool to build wealth with compounding and consistent income generation.

Here are five real estate stocks to buy now:

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RC

Ready Capital Corporation

$14.64

MFA

MFA Financial, Inc.

$13.48

AFCG

AFC Gamma, Inc.

$16.92

MITT

AG Mortgage Investment Trust, Inc.

$7.95

SACH

Sachem Capital Corp.

$4.53

Real Estate Stocks to Buy Now: Ready Capital (RC)

Image of a hand signing a paper with the loan as the title
Image of a hand signing a paper with the loan as the title

Source: shutterstock

Ready Capital (NYSE:RC), founded in 2017, is a multi-strategy real estate finance company specializing in loans backed by commercial real estate. Its loan programs include categories such as small business, bridge financing, commercial mortgage backed security, fixed-rate, and residential, among others. The PE Ratio (TTM) of 7.11 is very low, but the forward dividend and yield of $1.68 and 11.65%, respectively, are high. Additionally, they are more than enough to cover inflationary pressures as they persist.

Shares of Ready Capital have losses of nearly 6.4% in 2022, which is moderate. In its first quarter (Q1) earnings report, the company mentioned a “Net book value of $15.22 per share of common stock as of March 31, 2022” which represents a discount of approximately 8.5% to its stock price of $14 at the close on May 11.

MFA Financial (MFA)

MFA financial logo in France. MFA stock.
MFA financial logo in France. MFA stock.

Source: sylv1rob1 / Shutterstock

MFA Financial (NYSE :MFA) operates as an REIT in the U.S. market and was established in 1997. Its portfolio of investments includes residential mortgage assets, agency MBS, and residential whole loans. The shares have a PE Ratio (TTM) of 5.14 and offer a forward dividend and yield of 1.68 and 12.52%, respectively.

With losses of approximately 26% in 2022, the high dividend yield significantly mitigates the stock price decline. The one-year estimate target is 18.25, an upside potential of 30% compared to the closing stock price of $13.94 on May 11.

MFA Financial beat both earnings and revenue estimates for Q1 2022. Earnings per share (EPS) of 53 cents was higher than the estimate of 46 cents. Additionally, revenue of $63.05 million was 14.02% higher than the estimate. In 2021, net income increased 148.24% to $327.83 million.

Real Estate Stocks to Buy Now: AFC Gamma (AFCG)

Real estate investment trust REIT on an office desk.
Real estate investment trust REIT on an office desk.

Source: Vitalii Vodolazskyi / Shutterstock

AFC Gamma (NASDAQ:AFCG) is a REIT established in 2020 that provides institutional loans to high-quality cannabis operators nationwide during various production levels, ranging from cultivation to distribution. A REIT that supports the cannabis space seems very interesting.

The firm beat Q1 estimates on EPS and revenue. Earnings of $0.62 per share were higher than the estimate of $0.61 per share. Additionally, revenue of $18.64 million for the quarter was 8.1% higher than the estimate.

AFCG shares have a one-year estimate target of $25.68 and a forward dividend and yield of 2.2 and 12.91%, respectively.

In 2021, sales growth was explosive, rising by 589.72% to $38.59 million.

AG Mortgage Investment Trust (MITT)

AG Mortgage logo on a computer. MITT stock.
AG Mortgage logo on a computer. MITT stock.

Source: Pavel Kapysh / Shutterstock

AG Mortgage Investment Trust (NYSE:MITT) was founded in 2011 and is a residential mortgage REIT that is suitable for value investing and for income generation. The shares have a PE Ratio (TTM) of 1.5, which is very low. At the same time, MITT stock offers a forward dividend and yield of 84 cents and 10.67%, respectively.

The one-year target is $10.70, an upside potential of nearly 42% compared to the stock price of $7.62 at the close of the U.S stock market on May 11. Another factor that makes shares of AG Mortgage Investment Trust a deep value play is that the firm reported a $13.68 book value per share as of March 31, 2022. This is a discount of nearly 44% compared to the latest stock price.

In 2021, revenue growth and net income growth increased 137.25% and 124.71%, respectively.

Real Estate Stocks to Buy Now: Sachem Capital (SACH)

Picture of a loan agreement with a pen.
Picture of a loan agreement with a pen.

Source: William Potter / Shutterstock

Sachem Capital (NYSE:SACH) is a real estate finance company founded in 2010. Its lending programs include fix and flip loans, new construction loans, and distressed/foreclosure loans. The stock has a 52-week range of $4.26 to $6.55 and its closing stock price of $4.41 on May 11 is only 3.5% above its 52-week low. While buying stocks near their lows can be very risky, there are two main reasons to be bullish about shares of Sachem Capital.

First, the forward dividend and yield of 48 cents and 10.69%, respectively, are very attractive as the stock market is currently very volatile. Second, revenue increased 80.3% to $10.3 million in Q1 2022 year-over-year.

The revenue growth has gained momentum in the past two consecutive years coming in at 46.70% and 63.55% in 2020 and 2021, respectively. The stock has the same trend for net income, as well, with a growth of 45.16% and 48.09% for 2020 and 2021, which is very bullish.

On the date of publication, Stavros Georgiadis, CFA  did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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