Real estate investment trusts (REITs) are a unique asset class that don’t operate like your average stock. They offer shares of real estate portfolios, usually focused on one sector like industrial, residential or shopping malls.
Simply put, REITs are a way for smaller investors to be property holders in strategic sectors around the globe.
They are built as trusts, and you, as a shareholder (or more technically a unitholder), are considered a business partner. The REIT pays you your share of its income in the form of dividends.
The IRS mandates that REITs pay 90% of their incomes to unitholders. That means you need to make sure you are in the right sector, where growth is strong and sustainable.
My seven grade-A REITs to buy now are well-positioned to continue their growth beyond today’s volatile market. They are also beneficiaries of an expanding economy, since that means they can raise rents on their properties.
Because they are all dividend-focused investments, these are long-term buys, not short-term trades.
REITs to Buy: Eastgroup Properties (EGP)
Dividend Yield: 3.6%
Eastgroup Properties Inc (NYSE:EGP) is an industrial REIT that focuses on the Sunbelt.
Its core business is to build, manage and maintain industrial office and warehouse spaces for last-mile distribution of e-commerce goods. That means if you get a package shipped from, say, Target Corporation (NYSE:TGT), it goes out of a distribution center nearest to your home and then is eventually transported to a facility EGP owns that distributes the packages in your locality.
Logistics is a big business these days as more people are buying online, rather than going to brick-and-mortar stores. EGP is ahead of this trend and has the growth potential of the e-commerce industry as its top attraction.
EGP is also conservatively managed, has strong finances and delivers a healthy 3.6% dividend. It’s also diversified enough that it has properties from California, to Texas, to North Carolina.
REITs to Buy: Xinyuan Real Estate (XIN)
Dividend Yield: 6.3%
Xinyuan Real Estate Co., Ltd (ADR) (NYSE:XIN) is an up-and-coming player in the Chinese real-estate market.
It focuses on residential buildings for middle-class consumers, all across China, including its major cities.
The growth in the Chinese middle class is something that continues today, even if the economy has slowed. Bear in mind that ‘weak’ growth in China is still more than 7% GDP growth. The U.S. will be lucky if it comes in at half that.
The point is, China is continuing to grow, which means more and more people are leaving their farms and coming to cities — both large and small — to join in on this modern economy.
What’s more, XIN also has properties in the U.S. — Reno, Nevada; Irvine, Calif.; and New York City. These will certainly diversify XIN’s holdings and keep the income stream strong.
XIN currently yields an amazing 6.3%, and that’s after a 73% run in the stock year to date.
REITs to Buy: National Health Investors (NHI)
Dividend Yield: 4.8%
National Health Investors Inc (NYSE:NHI) is a REIT that is capitalizing on the graying of America.
NHI owns, finances and operates 188 senior living facilities in 31 states with more than 18,500 beds. These facilities range from independent living to total care.
The most compelling aspect to NHI’s business is that there is a significant megatrend that underlies its long-term growth. Tens of millions of Americans will be getting to that ‘nursing home’ age over the next decade, and these new facilities are being built much more resident-friendly than the last generation of senior-living facilities.
Funds from operations, the key sign in a REIT’s profitability, was up nearly 9% quarter over quarter and up 7.5% year over year. Both numbers show that growth is strong, even in a sluggish economy.
Add to this the fact that NHI throws off a hefty 4.8% dividend yield and you have a strong combination of growth and income on your side for the next decade.
REITs to Buy: CoreSite Realty Corp (COR)
Dividend Yield: 3%
CoreSite Realty Corp (NYSE:COR) is focused on the tech business. It’s a top provider of secure, reliable, high-performance data centers around the U.S., particularly focused in major U.S. cities.
This is another one of those opportunities to play a massive trend with a reasonably conservative stock.
Growth in cloud computing and Big Data means that equipment has to be housed somewhere. Add to this the growth in e-commerce and simply data storage for enterprise and large corporations and you have an idea of the potential here.
Although this sector has been pretty hot for a while now, COR has shown that it remains a long-term contender. The stock is up a whopping 27% year to date, and that’s off its highs in July, which means its consolidating here.
Its nearly 3% dividend yield will buy some patience as it gathers strength for another multiyear run.
REITs to Buy: First Industrial Realty Trust (FR)
Dividend Yield: 2.9%
First Industrial Realty Trust, Inc. (NYSE:FR) is hooked into one of the quietest revolutions in business today — logistics.
Getting goods and materials from point A to point B has been revolutionized by e-commerce firms, especially Amazon.com, Inc. (NASDAQ:AMZN). It used to be that there was the U.S. Postal Service and then a handful of other transport and delivery firms that could send products.
Now, delivery, storage and shipping are meeting the tech world. Same-day delivery, new delivery vehicles and other tech-enhanced supply chain options are now on the table for many retailers and wholesalers.
FR provides one of the best solutions for enhanced logistics. It owns, manages, buys, sells and develops industrial properties across North America. Because of the growth in this sector, major players are starting to acquire smaller firms to add their portfolios. FR could be on either end of this trend, but no matter what, there is plenty of growth ahead.
Its nearly 3% dividend doesn’t hurt either. The stock is up 18% year to date, triple the performance of the S&P 500.
REITs to Buy: Urban Edge Properties (UE)
Dividend Yield: 3.1%
Urban Edge Properties (NYSE:UE) has a unique niche that it has broadened in recent years.
It manages, acquires, develops and redevelops retail real estate in urban areas, particularly New York City. Urban Edge owns 83 properties that comprise 14.7 million square feet of gross leasable space. Some of these malls are also in other metropolitan areas around San Francisco; Washington, D.C.; Boston; Buffalo. N.Y.; and Norfolk, Va.
It’s a broader portfolio than when the company began, but it has remained true to the fact that metropolitan areas are great for high-traffic retail. Consumers will always want to access all the stores on their To Do list in one spot if possible, especially harried urbanites and suburbanites.
The stock has been somewhat subdued this year, only doubling the S&P 500’s performance and also nearly doubling the S&P’s average dividend yield. And this is in a weak economy. Just wait until things start to heat up.
REITs to Buy: National Storage (NSA)
Dividend Yield: 4.5%
National Storage Affiliates Trust (NYSE:NSA) is in, as its name implies, the storage business. It owns, operates and acquires self-storage units across the country.
NSA is one of the largest firms in the sector, with 418 storage properties in 23 states.
While the housing crisis in the U.S. has slowly receded, it has meant two things: people have downsized their living space, and younger professionals are less interested in buying property than renting. That mobility is also important because it allows them to move when necessary — and there are a lot of transitions from traditional big city work environments to smaller cities due to costs.
All these work in favor of the self-storage business. Since its birth in 2012, NSA has increased its property holdings by 400%. And it recently just paid $630 million to acquire smaller competitor iStorage.
This is a growth-by-acquisition story, which is how many top-tier companies stay on top of their sectors. NSA is already a big dawg in the sector and wants to make sure its moat is growing, not shrinking.
NSA is up 14% year to date yet continues to generate an attractive 4.5% dividend yield.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.