Technological change and demographic shifts have seemingly touched every industry in one form or another. Real estate is no exception, and some of the best real estate investment trusts (REITs) to buy now touch upon these shifts. They have seen monumental shifts that have led to the ascendancy or decline in certain types of REITs.
In addition to the frequent need for short-term housing, the aging of the population has increased the need for healthcare-related facilities. The shift of retail activity from physical stores to online orders means retailers need more warehouse space and less space in traditional stores.
These four REIT investments can help investors profit from our changing real estate needs.
Best REITs to Buy: Chatham Lodging Trust (CLDT)
Dividend Yield: 6.7%
Among the best REITs to buy now is Chatham Lodging Trust (NYSE:CLDT). Chatham is a hotel REIT specializing in upscale, extended-stay hotels in high-growth markets. High growth means a lot of people will make use of extended-stay hotels while they transition into a more permanent home or perform shorter-term job assignments. By sticking to high-growth markets, Chatham can ensure their properties will remain filled.
One unusual benefit that makes CLDT one a stellar REIT is that it pays monthly dividends, as opposed to the quarterly payments found in most REITs. Moreover, CLDT has kept payouts at levels that will not endanger the long-term health of the stock. The dividend had enjoyed annual increases between 2012 and 2016. Since 2016, the company has maintained a dividend of 11 cents per share per month. At current prices, this places the yield at about 6.7%.
This yield will serve as a high payout while investors wait for stock price growth to resume. CLDT stock peaked in the $31 per share range in early 2015. It had fallen into the low-$20s per share range by the end of 2015. The stock has traded near that price since.
Chatham projects modest profit growth for the foreseeable future. Since the equity trades at a forward multiple of just under 30, CLDT stock could remain at these levels for a time. However, if one wants to enjoy strong cash flows and a high percentage, monthly return on their money, CLDT stock will serve them well.
Best REITs to Buy: LTC Properties (LTC)
Dividend Yield: 6.1%
LTC Properties Inc (NYSE:LTC) is a REIT specializing in healthcare facilities. With 10,000 people aging into Medicare every day, demand for healthcare will remain on the rise for the foreseeable future. LTC stock has positioned itself to profit from this trend. It provides facilities for both skilled nursing and assisted living. Additionally, it also furnishes financing for development, renovations and property additions.
The company also commits itself to growth through acquisitions. LTC typically targets companies in the $10 million to $100 million range to grow while adhering to standards of performance and customer service. All of these benefits make it one of the best REITs to buy.
The Westlake Village, California-based REIT had seen steady stock growth between 2009 and 2016. Now, it trades about 30% below 2016 highs. Still, customers who buy now will get into LTC stock at about 17 times forward earnings. With flat profit growth predicted for the next two years, the stock price may remain close to these levels for a time. However, while they wait for the stock price to recover, they will receive a dividend yield of over 6% per year. Dividends have also increased every year since 2010.
With the company committed to growing its portfolio of properties, LTC stock should profit investors as long as baby boomers keep enrolling in Medicare.
Best REITs to Buy: Prologis (PLD)
Dividend Yield: 3%
Prologis Inc (NYSE:PLD) specializes in industrial and logistics-related REITs in 19 countries. The San Francisco-based company is also leading the way in industry consolidation. It will add to its current 684 million square feet of industrial space by acquiring DCT Industrial (NYSE:DCT), a Dallas-based industrial REIT. The deal is an all-stock sale valued at $8.4 billion. PLD agreed to pay a premium of 16% over the stock price of DCT at the time of the announcement.
The demand for industrial real estate has skyrocketed over the last few years. This trend has been driven by e-commerce. One could even make a good argument that analysts should start classifying these e-commerce fulfillment facilities as retail rather than industrial real estate. Nonetheless, e-retailing now makes up a more substantial portion of the industrial real estate. PLD’s involvement in this sector makes it one of the best REITs to buy now.
PLD stock also gives investors the chance to invest in e-commerce outside of the technology and retail sectors. However, with a dividend yield of 3%, PLD will enrich investors more through stock price gains than many REITs.
Also, since 2009, the stock has seen a steady increase resembling that of the S&P 500. Hence, investors who want both significant stock price growth and a dividend higher than that of the S&P will do well with PLD stock.
Best REITs to Buy: Vanguard REIT ETF (VNQ)
Dividend Yield: 4.8%
For those who prefer diversification within one equity, one of the best REITs to buy now could be VANGUARD Ix FUN/RL EST IX FD ETF (NYSEARCA:VNQ).
For long-term investors, most of the benefit comes from holding the ETF. The VNQ stock price quadrupled between 2009 and 2016. The equity’s value has stagnated since then. The stock traded in the low-to-mid-$80’s per share range for most of 2017. Now that it trades at about $77 per share, a buying opportunity has formed for this ETF.
Until the VNQ stock price resumes its move to 2016 highs and beyond, the fund pays its investors well to wait. This high-yield REIT ETF pays about 4.8% in distributions. Also, interest rates have slowly begun to rise. This indicates a booming economy which should help the companies in which VNQ stock invests. Once the equity begins to take off again, both income- and growth-oriented investors will enjoy significant benefits.
Its top holding happens to be a Vanguard real estate index. Still, for the most part, the ETF holds REITs directly. Other than the Vanguard fund, Simon Property Group Inc (NYSE:SPG), Prologis, Equinix Inc (NASDAQ:EQIX) and Public Storage (NYSE:PSA) stand among its top holdings.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.