Best REITs to Buy Right Now

In general, REITs performed very well during the first half of May. However, a pullback over the second half wiped out some of those gains. Further uncertainty among individual Fed members over strength in the economy and its ability to reach its 2% target goal weighed on REIT shares.

Despite the interest-rate outlook, many first-quarter REIT earnings reports have been quite favorable, proving the predictions wrong about REITs' ability to perform well in a higher interest-rate environment.

The following list of REITs contains three distinct categories (Best High Yield, Best Growth, and Best Value), utilizes both long and short performance time frames, and provides what could be the best opportunities in the REIT sector as we move into June.

Best High Yield REITs

When selecting REITs to purchase, investors shouldn’t choose high-yielding dividends without considering the overall recent performance, safety, and reliability of the dividend and the company.

NewLake Capital Partners (OTCMKTS: NLCP)

NewLake Capital Partners (OTCMKTS: NLCP) is an internally managed specialized industrial REIT in New Canaan, CT, with 31 properties totaling 1.6 million square feet across 12 states. It specializes in triple-net leasing to cannabis companies and provides capital when necessary. 

NewLake was founded in 2019 and had its IPO in August 2021. Its tenants include the largest companies in the cannabis industry, such as Curaleaf, Cresco Labs and Truelieve. As of May 2024, it had a 100% occupancy rate, with an average of 14.1 years remaining on its lease terms and 2.6% annual rent escalations.

On May 9, NewLake announced its Q1 2024 operating results. FFO of $0.50 beat the estimates of $0.46 and easily topped FFO of $0.44 in Q1 2023. Revenue of $12.60 million beat the consensus estimate of $11.98 million and topped Q4 2022 revenue of $11.42 million. 

NewLake Capital Partners pays a dividend of $0.41 per share. The $1.64 annualized dividend presently yields 8.48%.

Recent news could be quite favorable for NewLake’s future. On April 30, the U.S. Drug Enforcement Administration (DEA) was said to be supporting a move toward reclassifying marijuana from the Schedule I group to the less regulated Schedule III group. The proposal still needs to be reviewed by the White House Office of Management and Budget, then another review by an administrative judge.

On May 8, NewLake announced it was investing $16 million in a marijuana cultivation facility in East Hartford, CT, and had entered into a long-term triple net lease with its preexisting tenant, an affiliate of C3 Industries Inc. 

Since May 1, NewLake Capital Partners has had a total return of 1.56%. With an election approaching, the reviews may approve the reclassification, which would be very positive for all cannabis-related REITs. 

Alpine Income Trust  (NYSE: PINE)

Alpine Income Trust  (NYSE: PINE) is a Daytona Beach, FL-based retail REIT that owns and operates 138 high-quality net-leased properties of 3.8 million square feet across 35 states. 65% of its tenants are investment-grade companies such as Lowes, Dollar Tree, Walgreens, Walmart, Advanced Auto Parts and Dick’s Sporting Goods. As of March 30, Alpine Income Property Trust had an occupancy rate of 99%. 

On April 18, Alpine Income reported its first quarter 2024 operating results. FFO of $0.41 per share topped the street’s view of $0.38 per share and its Q1 2023 FFO of $0.36 per share. Revenue of $12.47 million beat the estimate of $11.66 million and was 116% above revenue of $11.17 million in Q1 2023. 

In addition, Alpine Income Property Trust maintained its full-year 2024 AFFO guidance from a range of $1.53-$1.58 per share, slightly above the consensus estimate of $1.54 per share.

 On May 31, Alpine Income Property Trust announced the appointment of Philip R. Mays as Senior Vice President, CFO and Treasurer. The appointment will become effective as of June 17.

Analysts at BTIG, Stifel and JonesTrading all have Buy ratings on Alpine, with price targets between $18 and $19. Alpine was recently trading at $15.69, so analysts are expecting further upside.

Alpine Income Trust pays a quarterly dividend of $0.275 per share, and the annual dividend of $1.10 yields 7.02%.

TPG Real Estate Finance Trust (NYSE: TRTX)

TPG Real Estate Finance Trust (NYSE: TRTX), a subsidiary of TPG Real Estate, is a mortgage REIT with a $3.5 billion portfolio of first mortgage loans with an average loan size of $69.4 million in geographically diversified primary and select secondary markets across the U.S. 100% of its loans are presently performing. 

On April 25, the Board of Directors approved a share repurchase program for up to $25.0 million of common stock. 

On April 30, TPG RE Finance Trust reported its Q1 2024 operating results. Adjusted earnings per share (EPS) of $0.30 beat the estimated $0.18 and topped EPS from Q1 2023 of $0.17. Revenue of $3.927 million was ahead of estimates of $23.180 million and 54.14% above Q1 2023 revenue of $25.255 million.

On May 7, Wells Fargo analyst Donald Fandetti maintained TPG RE Finance Trust at Overweight and raised the price target by 28.5%, from $7 to $9.

TPG Real Estate pays a quarterly dividend of $0.24 per share. The dividend yield on the $0.96 annual dividend is 11.2%.

Since May 1, TPG RE Finance Trust has produced a total return of 17.46%. The earnings report and declining mortgage interest rates were enormous catalysts for the share price increase, and TPG RE Finance has solid momentum that can continue into June.  

Best Growth REITs

When looking for the best growth REIT stocks to purchase, investors can feel confident about making the best selections by considering the company's long-term price history, regardless of where that price is today. These three REITs have a terrific appreciation history but lower dividend yields than many other REITs.

Iron Mountain Inc (NYSE: IRM)

Iron Mountain Inc (NYSE: IRM) is a Portsmouth, NH-based specialty REIT focused on information management and storage, data center infrastructure and asset lifecycle management. Iron Mountain was founded in 1951 and has more than 240,000 customers worldwide. In recent years, Iron Mountain has shifted its focus from paper storage to data storage. 

On May 2, Iron Mountain reported its Q1 2024 operating results. FFO of $1.10 per share beat the consensus estimate of $0.92 per share and trounced FFO from Q1 2023 of $0.71 per share. Revenue of $1.48 billion beat the analyst estimates of $1.45 billion and was 12.40% better than revenue of $1.31 billion in Q1 2023. Iron Mountain also affirmed its full-year 2024 AFFO guidance of $4.39- $4.51 per share.

Iron Mountain is a premiere growth REIT. Since February 1996, its long-term total return has been 3,683.65%, or 6,394.53%, if shares were reinvested. A $10,000 investment during that time would now be worth $378,225.41, or $649,732.16 if shares were reinvested.

Since May 1, Iron Mountain has produced a total gain of 4.14%.

American Tower Corp (NYSE: AMT)

American Tower Corp (NYSE: AMT) is a Boston, MA-based specialty REIT that calls itself “a global leader in wireless infrastructure.” Founded in 1995, American Tower owns, operates and develops wireless and broadcast communications real estate. Most of its business is leasing space on wireless and broadcast towers and it also leases portions of the land below the building for equipment storage. Typical tower components are coaxial cabling and fiber optic cables.

American Tower has a presence in 224,000 global communication sites across 25 countries in six continents. About 43,000 properties are in the U.S. and Canada, and approximately 181,000 are international. Contracts usually have a term of five to 10 years, with renewal options and annual lease escalators of about 3%.

American Tower has a new CEO/President, Steven Vondran. On February 1, Mr. Vondarn replaced retiring long-time CEO/President Tom Bartlett. Mr. Bartlett remains an advisor to the new CEO.

On April 30, American Tower released its first-quarter 2024 operating results. Adjusted Funds from Operations (AFFO) of $2.79 per share easily beat the consensus estimate of $2.54 per share, and AFFO of $2.54 in Q1 2023. Revenue of $2.834 billion also beat the street’s view of $2.795 billion and topped revenue of $2.767 billion from Q1 2023.

On May 30, Barclays analyst Tim Long maintained American Tower at Overweight and lowered the price target from $234 to $223. On April 30, Kari Firestone of Aureus Asset Management chose American Tower on CNBC’s “Halftime Report Final Trades,” saying the cell tower business is strong.  

After a problematic April in which American Tower had a total return of -10.27%, it bounced back nicely in May to register a total gain of 14.81%. The strong Q1 earnings and the Raymond James upgrade was a catalyst.

American Tower has been a leading growth REIT for many years. Over the past ten years, it’s had an annualized 10-year total return of 165.16%. It remains one of the top growth REITs to buy in June.

Terreno Realty Corporation (NYSE: TRNO)

Terreno Realty Corporation (NYSE: TRNO) is an industrial REIT that owns and operates 290 properties with 17.4 million square feet in six major coastal U.S. markets. Those areas are Miami, Northern New Jersey/New York City, Washington D.C., Seattle, Los Angeles and San Francisco. Terreno has 633 tenant customers as of December 31, 2023.

On May 2, Terreno announced it acquired a portfolio of 28 industrial properties in New York City, Northern New Jersey, San Francisco and Los Angeles for a purchase price of approximately $364.5 million. The buildings are presently 91.6% leased to 70 tenants. 

On May 8, Terreno released its first-quarter operating results. Funds from operations (FFO) of $0.57 just missed the estimate of $0.58 but easily topped the Q1 2023 FFO of $0.51. Revenue of $85.03 million also missed the street’s view of $87.65 million but was 13.90% higher than Q1 2023 revenue of $74.65 million. 

Several analysts weighed in on Terreno Realty in May. The two best were JMP Securities analyst Mitch Germain, who reiterated a Market Outperform rating and maintained a $65 price target, and Barclays analyst Brendan Lynch, who maintained Terreno at Overweight but lowered the price target from $71 to $68.

Despite a difficult April in which it lost over 10%, Terreno rebounded to post a total gain of 2.69% in May. Terreno has a superior long-term growth record. Its ten-year total return is 242.22%.  

Best Value REITs

Long-term investors looking for undervalued REITs should consider solid companies with good track records over the years who, for one reason or another, have fallen out of favor with Wall Street. These REITs now provide solid dividend yields for income investors, have low price/FFO ratios and, over time, may provide solid appreciation once economic conditions improve.

Independence Realty Trust (NYSE: IRT)

Independence Realty Trust (NYSE: IRT) is a Philadelphia-based residential REIT that, at the end of 2023, had 110 multi-family properties with 32,685 units across 12 states. 74% of the portfolio is in the Sunbelt regions. Its investment strategy is focused on purchasing properties near major employment centers, with good school districts and higher-class retail stores. Independence Realty had an average occupancy rate of 95.7% in May for Same-Store.

On April 24, Independence Realty reported first-quarter 2024 operating results. FFO of $0.27 was in line with the consensus estimate. Revenue of $160.331 million just missed the estimate of $161.029 million and was also slightly below revenue from Q1 2023 of $161.135.

Independence Realty said that the full-year 2024 Core FFO would be $1.12-$1.16, with a midpoint of $1.14 that matched the consensus estimate.

Independence Realty has gained 7.42% since May 1. Even with the gains made in May, the Price/FFO ratio is still only 14.85, well below the P/FFO of peers such as AvalonBay Communities, Inc. (NYSE: AVB), with 17.76, and Camden Property Trust (NYSE: CPT), with 15.39. There could be further room to appreciate from its recent closing price of $16.93, but it must overcome recent resistance at $17.42. 

Independence pays a quarterly dividend of $0.16 per share and the annual dividend of $0.64 per share yields 3.78%. It should continue to do well in June.

Realty Income Corp (NYSE: O)

Realty Income Corp (NYSE: O) is a San Diego-based, triple-net lease REIT with over 15,450 properties worldwide. The “Monthly Dividend Company,” as it’s widely known, is a member of the S&P 500 and an S&P 500 Dividend Aristocrat.   

On May 6, Realty Income reported its Q1 2024 earnings. FFO of $1.05 per share beat the estimate of $1.04 per share and topped FFO of $1.03 per share in Q1 2023, but revenue of $1.26 billion beat the forecast by $160 million and easily beat revenue of $865.71 million in Q1 2023. 

On May 17, Realty Income increased the monthly dividend from $0.2570 to $0.2625 per share. This was the 125th dividend increase since the 1994 IPO. The new annualized dividend of $3.15 per share yields 5.91%. 

Realty Income remains one of the foremost REITs today and with good reason. Its total return since January 3, 1995, is 1,188.67%. With a P/FFO of only 13 and a history of trading above $70 as recently as 2022, this very popular REIT remains an excellent value play.

On May 31, UBS analyst Brent Dilts maintained a Buy on Realty Income but lowered the price target from $67 to $61. That’s still well above its recent closing price of $53.31.

On June 3, Realty Income announced it had revised its 2024 guidance for Normalized FFO from $4.17-$4.29 to $4.19 -$4.28 per share. AFFO guidance was also increased from $4.13-$4.21 to $4.15-$4.21. 

Realty Income has had a total gain of 0.53% since May 1.

Regency Centers Corp (Nasdaq: REG)

Regency Centers Corp (Nasdaq: REG) is a Jacksonville, FL-based retail REIT, founded in 1963 that owns and operates 482 properties, totaling more than 61 million square feet in higher-income areas, mainly on the Eastern Coast of the U.S. Its portfolio, with over 9000 tenants, has a 95.8% lease rate, includes 80% grocery-anchored properties, along with restaurants, service providers, medical spaces and higher-class retailers. Regency Centers is a member of the S&P 500.  

On May 2, Regency Centers reported its first-quarter 2024 operating results. FFO of $1.08 beat the consensus estimate of $1.03 and was equal to FFO of $1.08 in Q1 2023.   Revenue of $357.46 million beat the consensus estimate of $346.96 million and topped Q1 2023 revenue of $317.977 by 12.41%. 

On May 23, Mizuho analyst Haendel St. Juste maintained Regency Centers with a Neutral rating and bumped the price target from $60 to $61.    

Regency performed well in May, with a total gain of 4.59%. The annualized $2.68 dividend yields 4.32%. The dividend is well covered, with a payout ratio of 64% on a forward annual FFO of $4.18. However, Regency at $62.05 is still well below its December high of $67.73.

Recent REIT Analysis

REIT Sector Performance

You can learn quite a bit from how the sector performs as a whole, reflecting on figures collected by Benzinga.

What to Look for When Choosing The Best REITs

While publicly-traded REITs are bought and sold on the stock market like any other publicly-traded company, REITs are a unique asset class that needs to be analyzed differently than other stocks. 

Funds From Operations (FFO)

If you're familiar with stocks, you're most likely familiar with terms like earnings per share (EPS) and price-to-earnings ratio (p/e ratio). However, these metrics don't offer much help when looking at an equity REIT.

To understand a REIT's true cash flow, you have to look at their funds from operation (FFO). Since real estate is a depreciable asset, a REIT's reported net income includes a significant depreciation expense. It also includes capital gains and losses from the sale of properties, which don't represent what investors can expect the company to earn on a consistent basis.

FFO adds depreciation back into the REIT's net income and takes out any gains or losses on the sale of property, providing a more accurate picture of a REIT's true earnings.

To use FFO as a way to value REITs, we divide the REIT's current share price by its FFO per share to get a price to FFO ratio. We then compare the price to FFO of the different REITs in each real estate sector to find value opportunities.

Balance Sheet

REITs have to carry a lot of debt in order to finance the properties they purchase. This is especially true because REITs are required to pay out 90% of their taxable income to shareholders in the form of dividends. This doesn't leave REITs with the ability to stockpile a lot of cash.

It's important to make sure that the REIT you're investing in isn't carrying too much debt, though. The easiest way to do this is by looking at their total debt compared to their earnings before interest, tax, depreciation and amortization (EBITDA). This is called a debt to EBITDA ratio.

For instance, if a REIT has a total of $1 billion in debt and their annual EBITDA is $250 million, you would divide $1 billion by $250 million to get a debt to EBITDA ratio of 4.

Ideally, you want to look for REITs with a debt to EBITDA ratio somewhere between 4 and 6. Anything above 6 and their balance sheet starts to look risky. You also want to make sure that they're not too conservative with their debt. A debt to EBITDA ratio below 4 can indicate that they're using too much cash that could be going to investors instead of utilizing debt.

A solid REIT management team will use a reasonable amount of debt to maximize their overall returns. This means more growth and higher dividends being paid to investors.

Dividends

One of the greatest advantages to REITs is their dividends. On average, REITs pay out significantly higher dividends than most other dividend stocks. 

You want to be careful not to get caught in a yield trap, though. Some REITs may increase their dividend payments to an amount they can’t sustain in order to attract or keep shareholders. They also may put off cutting dividends when their FFO has dropped. In either case, buying a REIT with a dividend it can’t sustain is a quick way to lose money. 

To get an idea as to whether a REIT’s dividend is safe, you’ll want to look at the FFO payout ratio. This compares the company’s FFO per share to its dividend rate. 

For instance, if a REIT has an FFO per share of $2 and a dividend payment of $1.50 per share, you’ll simply divide the dividend rate by the FFO per share to get 75%. 

Ideally, the REIT’s FFO payout ratio will be somewhere between 70% - 80%. However, a lower payout ratio is fine if you’re happy with the yield. A slightly higher payout ratio isn’t necessarily a red flag as long as they’ve consistently maintained that payout ratio while either keeping or increasing their dividend payments over time. 

The Real Estate

You can’t forget that investing in a REIT is essentially investing in a real estate portfolio. If you were buying properties directly instead of investing in a REIT, you would want to invest in assets that would provide you the greatest potential return with the least amount of risk possible. You want to look at REITs the same way. 

If you’re looking for a dependable REIT, you’ll want to look at ones that invest in a property type with a strong outlook. For instance, if you think shopping malls are doomed you won’t want to invest in a REIT that owns a lot of shopping malls. 

REIT ETFs

A REIT ETF is an exchange-traded fund that invests in REITs and other real estate stocks. These funds typically follow a REIT index and have a diversified portfolio with investments spread out across multiple companies.

Investing in The Best REITs

A REIT’s recent financials provide a great basis for choosing the best ones to buy, but major changes can happen between quarterly filings. Before investing in a real estate stock, be sure to look for recent news about any acquisitions, dispositions, offerings, or any other relevant news that can affect their future performance.

Other intriguing REITs include the Plymouth Industrial REIT, Emirates REIT, U.S. REIT ETF and the Apple Hospitality REIT.

You can learn more about how to use REITs to invest in the real estate market with our guide on How to Invest in REITs.

Related content: BEST HIGH-YIELD REITS

Frequently Asked Questions