Real estate investment trusts (REITs) fell off a cliff in March. According to the FTSE NAREIT All REITs Index, REITs dropped more than 40% since March, when the novel coronavirus turned the world upside down.
The biggest concern was how REIT customers pay their rents and how that was going to happen moving forward. Also, for those REITs that own properties, those properties have been devalued and that means their books are going to look a lot different in the quarters moving forward.
Fortunately, the Federal Reserve and U.S. Treasury Department have stepped in to underpin the bedrock of the economy in historic fashion.
That has helped the REIT sector regain a good amount of its lost ground. Today, FNAR is only off 20% from March highs. That’s a big move in slightly more than a month.
When I make Growth Investor recommendations, I always use a healthy weighting in what I call Elite Dividend Payers, including REITs that best fit that description. I’ve selected seven, A-rated REITs to buy now:
- Safehold (NYSE:SAFE)
- Duke Realty (NYSE:DRE)
- Easterly Government Properties (NYSE:DEA)
- Digital Realty Trust (NYSE:DLR)
- Prologis (NYSE:PLD)
- Crown Castle International (NYSE:CCI)
- American Tower (NYSE:AMT)
I chose each of these stocks using my Portfolio Grader screening tool, which can determine the best sectors that have the wherewithal to not only come back, but thrive moving forward. Without further ado, let’s take a closer look at each of these REITs to buy now.
Solid REITs to Buy Now: Safehold (SAFE)
Safehold is a younger REIT — established in 2017 — that acquires, owns and manages ground leases on a triple net basis.
Let’s unpack this. Ground leases allow the lessees to develop an undeveloped piece of property as they see fit. You see this with say, a drug store or convenience store chain that will build their properties to their specifications to maintain a consistent brand. Or, it may be a company that is leasing property to put up a housing development or an office complex.
Triple net means that the lessee is responsible for build out, maintenance and taxes on the properties. This means SAFE doesn’t have to worry about any of these costly issues and lowers its exposure to those large expenses.
While business may slow, the economic support from the U.S. government will help keep them stable until the economy has a change to regain momentum.
SAFE stock is up 131% in the past 12 months and is positive throughout 2020. It doesn’t have a big dividend — about 1% — but that’s a result of the stock’s gains.
Duke Realty (DRE)
Duke Realty has been around since 1972, so it has seen its fair share of economic booms and busts and has managed to build a strong, reliable REIT decade after decade.
It has a broadly diversified portfolio of properties that it leases — industrial, medical and government are its three main focuses. These are all in high demand and are reliable sources of income.
Another great thing about REITs is they’re technically set up as trusts, so shareholders are owners and receive the business’ net income in the form of a dividend. This is why at Growth Investor I always say it’s smart to buy quality REITs for the long-term and reinvest the dividends or use that cash for other ambitions.
DRE is built on that traditional REIT philosophy and delivers a reliable dividend — now sitting at 2.7% — for solid income during uncertain times. DRE stock is about breakeven year to date and up 11% in the past 12 months.
Easterly Government Properties (DEA)
Easterly Government Properties is a very popular REIT right now because it has one of the best customers you could ask for in a fragile market like this one — the U.S. government.
DEA leases office space to various agencies of the U.S. government through the General Services Administration. The government is a huge beast and, as with most taxpayer money, it doesn’t keep it but recirculates it back to private businesses in the form of contracts.
In this case, it leases property from DEA to house its workers. This means long-term contracts, steady income and revenue. This is one of the bedrock markets for DRE and it’s the sole market for DEA. That also gives it a significant competitive moat, since getting the federal government to lease your properties is a lengthy process. Once you’ve established yourself, it’s much easier to get more business, since the parties are familiar with each other’s expectations.
DEA stock is up 46% in the past 12 months and still has a 3.8% dividend.
Digital Realty Trust (DLR)
Digital Realty Trust is another REIT that everyone is looking at these days. That’s because its business is all about leasing data centers and colocation operations.
When you look at the how much demand there is in telework, online retail, teleconferencing and video streaming, you can understand why DLR is in such a great spot right now.
And DLR is a global business, which means, right now, demand is huge for its services, since its customers are the select few that are actually growing in this economy. Furthermore, given the long tail we may experience from Covid-19 and social distancing, this could be a long-term gamechanger that changes the way digital services are deployed moving forward.
DLR has a $38 billion market cap, which means it has the resources to meet the demand, especially from the big players.
Plus, when things turn more normal, it will be a big beneficiary of 5G technology, cloud computing, the Internet of Things and “the mother of all technologies.”
DLR stock is up 22% in the past year and has a respectable 3% dividend.
Prologis is another REIT in the right sector at the right time.
It provides industrial properties for logistics firms. That means all the shipping companies that are moving goods across the country — and 19 others — and across borders are potentially using Prologis facilities.
This is about the global supply chain. And with e-commerce, you can buy a pair of super-duty hiking pants from China and have them delivered to your house in less than a week. Or locally, you can buy a book from California and have it at your home in a day or two.
That takes a significant amount of coordination and a very intricate supply chain to pull it off. This type of business is growing quickly, and Prologis is on the front lines.
It has more than 3,800 buildings with over 800 million square feet of space on four continents. That’s why it has a market cap of $66 billion. And its growth is practically built into the market trends.
PLD stock is up 14% in the past year and it pays a solid 2.6% dividend.
The final two companies are both powerhouses in the same sector — telecom infrastructure. Both benefit from the same megatrend and both are leaders in this particular sector. They both are dominant players in the transition to mobility.
That means mobile phones, and cloud computing as well as smart cars and houses and buildings and soon, artificial intelligence, opening up a world of incredible growth opportunities. It is how we can access information on a consumer or commercial basis across the country and around the world.
Both are arguably the top firms in the space and given the expense in developing their operations and properties, low interest rates make it a great time to grow their operations for the boom that is just beginning
Crown Castle International (CCI)
Crown Castle International is the largest providers of shared communications infrastructure in the U.S. It has more than 40,000 cell phone towers and 70,000 miles of fiber optic cable installed.
CCI has long-term contracts with both T-Mobile (NASDAQ:TMUS) as well as AT&T (NYSE:T) for its mobile towers. And it leases its fiber to local and national internet and media providers. Both of these sectors are undergoing rapid demand growth. With 5G around the corner, working with major telecom providers is a good place to be.
CCI stock is up 26% for the year and supports a 3% dividend.
American Tower (AMT)
American Tower is expressly focused on broadcast towers, but its market is global.
It has over 170,000 towers around the world — more than 40,000 in the U.S., 75,000-plus in Asia, 16,000-plus in Europe, the Middle East and Africa, and 37,000-plus in Latin America.
Bear in mind, in less developed countries, broadcast towers are crucial for telecommunications because terrain and equipment are expensive and the costs can get prohibitive quickly. Mobile phones and wireless connectivity are fundamental.
In developed economies, it’s all about upgrading to 5G networks that will be many orders of magnitude faster than current 4G technology and open up whole new business opportunities and efficiencies.
AMT stock is up 21% in the past year and has a 1.7% dividend.
It’s one of my favorites on the Growth Investor buy list, and I’ve got a lot more where that came from. One of my other top stocks also offers that magical combination of growth and income. Best of all, its products are absolutely crucial to “the mother of all technologies”: artificial intelligence (AI).
The AI Master Key
If artificial intelligence sounds futuristic, even far-fetched — well, keep in mind, you’re already using it every day. If you’ve ever used Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Assistant or Apple’s (NASDAQ:AAPL) Siri … if you’ve had Netflix (NASDAQ:NFLX) recommend a movie or Zillow (NASDAQ:Z) recommend a house … even an email spam filter … then you’ve used artificial intelligence.
In this new world of AI everywhere, data becomes a hot commodity.
As scientists find even more applications for artificial intelligence — from hospitals to retail to self-driving cars — it’s incredible to imagine how much data will be involved.
To create AI programs in the first place, tech companies must collect vast amounts of data on human decisions. Data is what powers every AI system. As one AI researcher from the University of South Florida puts it, “data is the new oil.”
To cash in, you’ll want the company that makes the “brain” that all AI software needs to function, spot patterns and interpret data.
It’s known as the “Volta Chip” — and it’s what makes the AI revolution possible. And its stock is a “Strong Buy” in my Portfolio Grader now.
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Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.