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5 REITs to Buy as U.S. Blacklists Chinese Companies

Zacks Equity Research

Just before the United States and China are scheduled to meet for trade negotiation on Oct 11 and 12, America blacklisted 28 Chinese companies and placed visa restrictions on Chinese officials on human rights concerns.

This spooked markets, compelling investors to seek safer equity options. REITs seem to hold ground in this volatile market scenario.

Companies Blacklisted

On Oct 7, the U.S. blacklisted 28 Chinese companies that too just three days before the high-level trade negotiations are scheduled. U.S. President Donald Trump and his administration cited human rights violation as a reason behind the blacklisting.

This blacklisting has dealt a strong blow to China’s dominant AI industry and impede its growth in the United States. This move at the beginning of the week impacted Chinese tech giants like Hangzhou Hikvision Digital Technology Co., Ltd. dealing in video surveillance and the world’s most valuable AI startup, SenseTime.

U.S.-based firms will have to halt production and sales following the blacklisting. Shares of Ambarella, Inc. AMBA plunged 9.5% after its prime customer Hikvision was blacklisted. Ambarella carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chinese officials on Tuesday said that they will take retaliatory measures against the United States and advised American not to interfere in China’s internal affairs. In fact, the Chinese delegation visiting Washington on Oct 11 and 12, led by China’s Vice Premier Liu He, will not be carrying the title of “special envoy,” signaling that he has not received any specific instructions from President Xi Jinping.

Further, a report in the South China Morning Post claims that Beijing is anticipating that the upcoming trade talks to be fruitful. Investors were initially quite hopeful that this high-level talk would ease the ongoing trade war. But this blacklisting has raised doubts about the outcome of the trade talks among investors.

All the negative headlines have dampened the markets, pushing all major indexes to the negative territory. Investors are now looking for stocks that are least sensitive to trade and will provide stable returns; Real Estate Investment Trusts (REITs) seem apt in such a market scenario.

5 REITs to Buy

With trade issues lingering, investing in Real Estate Investment Trusts seems to be apt for now. REITs are the second least trade-sensitive sector and generate only 13% overseas revenues.    

In fact, stocks of REITs dealing with health care, date center and multifamily are the least affected and instead show a steady rise.

Moreover, the Real Estate Select Sector has gained 26.3% on a year-to-date basis compared with the 15.4% rise of the S&P 500. Hence, we have shortlisted five REITs which flaunt a Zacks Rank #2 (Buy) and have a steady dividend flow.

Mid-America Apartment Communities, Inc. MAA is a publicly-traded REIT that owns, manages, acquires and develops quality apartments in the United States. Mid-America Apartment’s expected earnings growth for the current year is 4.3%. The Zacks Consensus Estimate for current-year earnings has moved north by 0.8% over the past 60 days. The stock has a dividend yield of 2.9%.

Essex Property Trust, Inc. ESS is a publicly-traded REIT that acquires, develops, redevelops, and manages multifamily residential properties in selected West Coast markets. Essex Property’s expected earnings growth for the current year is 6.1%. The Zacks Consensus Estimate for current-year earnings has risen 0.5% over the past 60 days. The stock has a dividend yield of 2.4%.

Equity Residential EQR is a publicly-traded REIT that acquires, develops, redevelops, and manages rental apartment properties located in urban and high-density suburban markets across the United States. The company’s expected earnings growth for the current year is 6.2%. The Zacks Consensus Estimate for current-year earnings has climbed 1.2% over the past 60 days. The stock has a dividend yield of 2.6%.

Equity LifeStyle Properties, Inc. ELS is a publicly-traded, self-administered, self-managed REIT. The company’s expected earnings growth for the current year is 8.5%. The Zacks Consensus Estimate for its current-year earnings has moved up 0.5% over the past 90 days. The stock has a dividend yield of 1.8%.

Agree Realty Corporation ADC is a publicly-traded REIT dealing with acquisition and development of properties for retail tenants. Agree Realty’s expected earnings growth for the current year is 6.3%. The Zacks Consensus Estimate for current-year earnings has moved up 0.3% over the past 90 days. The stock has a dividend yield of 3.1%.

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