As investors begin to see light at the end of the Federal Reserve rate-hike tunnel, real estate investment trusts (REITs) are bouncing back off their lows of six weeks ago. Now could be an ideal time to start building a basket of REIT stocks. But with 208 REITs to choose from, how does an investor know which ones make the best purchases?
Take a look at five well-established REITs from diversified subsectors that have high-quality, long-term total returns (appreciation plus nonreinvested dividends) that could be a great start toward building your long-term basket of REITs:
Digital Realty Trust Inc. (NYSE: DLR) is an Austin, Texas-based data center REIT with more than 300 facilities in large metro areas across 23 countries.
The 52-week price range is $85.76 to $178.22, and the most recent closing price was $111.70. It pays an annual dividend of $4.88, which yields 4.4%.
Since 2004, Digital Realty Trust has had a total return of 1,263.13%, or an average annual total return of 15.56%. That kind of long-term return is pretty tough to match.
Essex Property Trust Inc. (NYSE: ESS) is a San Mateo, California-based residential REIT that owns and manages 62,000 apartment units in 253 communities, along with some retail space in eight West Coast markets of the U.S. Essex Property Trust was founded in 1971 and launched its initial public offering (IPO) in 1994.
Essex Property Trust has a record of 28 consecutive years of dividend increases, making it an S&P 500 Dividend Aristocrat. According to its website, it was the only REIT to increase its dividend during the recession in 2010.
Since 1995, Essex Property Trust has had a total return of 1,841.51%, or 11.47% per year.
A favorite among investors, Realty Income Corp. (NYSE: O) is a worldwide retail REIT with over 11,400 commercial properties on long-term net leases. Its tenant list mostly comprises large, well-known companies like Walgreens Co., Dollar Tree Inc. and FedEx Corp.
Realty Income is one of only 65 S&P 500 Dividend Aristocrats because it has increased its dividend 117 times for at least 25 consecutive years. In addition, it pays its dividend on a monthly basis, which is advantageous for income investors.
The annual dividend is $2.98, for a yield of 4.7%. Since 1995, Realty Income has had a total return of $1,248.95%, or just under 10% per year.
Caretrust REIT Inc. (NYSE: CTRE) is a San Clemente, California-based healthcare REIT that owns and leases senior housing, skilled nursing and assisted living facilities. Its portfolio consists of 198 properties in 21 states.
Caretrust has an annual dividend of $1.10 that presently yields 5.5%. Over the past five years, its dividend has grown by 50%. Although it hasn’t been around as long as the other REITs on this list, since 2014 it has had a total return of 121.96%, with an average annual total return of 9.82%.
The 52-week range is $15.90 to $23.59, and its most recent closing price was $19.88.
Prologis Inc. (NYSE: PLD) is a San Francisco-based industrial REIT that owns and manages over 5,000 industrial logistics properties throughout the U.S. and 18 other countries. Founded in 1983, the company has been a leader in appreciation among REIT stocks. Although it pays an annual dividend of $3.16, it is more growth- than income-oriented, with an annual dividend yield of 2.8%.
Since 1997, Prologis has had a total return of 588.49%, or 8.01% per year.
While there is no guarantee that these particular REITs will perform as well or better than their long-term records, it always makes sense to start building an investment basket with the leading stocks in any particular field.
Weekly REIT Report: REITs are one of the most misunderstood investment options, making it difficult for investors to spot incredible opportunities until it’s too late. Benzinga’s in-house real estate research team has been working hard to identify the greatest opportunities in today’s market, which you can gain access to for free by signing up for Benzinga’s Weekly REIT Report.
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