Real estate stocks and real estate investment trusts (REITs) are a very diverse investment group. Basically, REITs are landlords, but the properties they control are wide-ranging. From undeveloped lots to shopping malls to warehouses to simply holding mortgages on residential properties, the variety is a blessing — but can also be a curse.
You can’t just buy REITs when interest rates are low, thinking a property-boom will be good for the whole sector. As we’ve seen, shopping malls are having a hard go of it, and the pandemic is shifting the way consumers shop.
Also, mortgage rates are low, but the continuing rise of Covid-19 cases may mean default rates increase. And work from home is a long-term trend, not a short-term solution, so office buildings in big cities won’t necessarily have an easy go of it.
Consider this an early holiday gift. These seven real estate stocks to tour before year’s end have been selected to be the best REITs in the most durable sectors right now. In addition to the REITs, there are also a few straight real estate plays as well.
- CoreSite Realty (NYSE:COR)
- Hannon Armstrong Sustainable Infrastructure (NYSE:HASI)
- St. Joe Company (NYSE:JOE)
- Redfin Corp (NASDAQ:RDFN)
- Safehold Inc. (NYSE:SAFE)
- Uniti Group Inc. (NASDAQ:UNIT)
- Innovative Industrial Properties (NYSE:IIPR)
Real Estate Stocks: CoreSite Realty (COR)
As we continue to work remotely, shop remotely and get our food remotely, there is a greater demand on computer networks and telecom systems.
And moving forward, this will only increase as we build out new logistics networks for moving goods around and as everything continues to get “smarter” — like our cars, clothes and houses.
This is why COR is a good choice when it comes to real estate stocks. Its business is building, operating and maintaining data centers. Big firms use COR as well as smaller companies. But the simple fact is, this is a great growth sector, and being one of the leading REITs in the space has distinct advantages.
COR stock is up nearly 9% in the past 12 months and has a 4% dividend. Right now, this stock looks to be consolidating after a multi-year run. It’s a good time to step in.
Hannon Armstrong Sustainable Infrastructure (HASI)
One of the massive new trends going on in the markets is called ESG investing. ESG stands for Environmental, Social and Governance. Basically, it’s about rethinking how to value companies in a broader perspective, taking into account the company’s environmental footprint, what it gives back to its workers and community and how transparently and diversely it’s governed.
Hannon Armstrong Sustainable Infrastructure is an REIT that not only specializes in managing properties with a focus on environmentally friendly projects, but also works with governments to build many of these projects. That means HASI has some very reliable clients.
And its prominence in ESG means a lot of money will be rolling its way.
HASI is up 79% in the past year, yet only carries a price per earnings (P/E) ratio of 36 and still provides a 2.6% dividend. For that reason, the stock has a “B” rating and a buy recommendation in my Portfolio Grader.
St. Joe Company (JOE)
This real estate company is pretty close to an REIT, but it isn’t one. And since it’s not, it doesn’t have the kind of dividend most REITs have. This is because investors aren’t treated as owners, splitting the net income of the business.
St. Joe Company is based out of Florida and has developed a unique business built around one of the state’s key economic engines — snowbirds. Those are the people who come down from northern climes to bask in the Florida warmth, typically just for the winter months. JOE builds residential properties as well as resorts and commercial space around those communities. It also develops hotels, restaurants and other commercial facilities.
The stock is up 74% this year, yet it only delivers a sub-1% dividend. Still, I’ve given it a “B” rating and a recommendation to buy in my Portfolio Grader.
Redfin Corp (RDFN)
One of the new hot trends in real estate stocks is investing in online services that make listing and shopping for a home easier, especially remotely.
Redfin is one of the big players in this space. Now in over 90 markets in the U.S. and Canada, the online brokerage company is selling and buying more than 235,000 homes a year. Again, this isn’t a short-term event; online real estate brokerages are part of a trend that is the next evolution in real estate buying and selling in the consumer market.
The stock is up 142% in the past year, and it’s using that new capital to expand its operations around North America. It has a $5.25 billion market capitalization at this point, so it’s in a growth phase which should last for a while given low interest rates and an economy that’s nearing recovery from the pandemic.
RDFN currently has a “B” rating in Portfolio Grader.
Safehold Inc. (SAFE)
We’ve all heard the saying that the three most important things in real estate are location, location, location.
Well Safehold has built an REIT around that concept. It is one of the leading ground-lease REITs in the U.S. What that means is, it leases undeveloped property to a tenant who can then build whatever they want on the property. The tenant usually holds that lease for a long period of time (say, 50 years).
You can imagine holding ground leases in big cities. But also, with all the distribution channels being set up for e-commerce, warehouses and distribution centers are also a big deal, especially around port cities.
SAFE is a relative newcomer to this sector, but it has properties well distributed across the U.S., especially in the West and Northeast. It has a market cap of $3.62 billion, and a dividend nearing 1%. But the stock is up 63% in the past year, and there’s more to come. For that reason, I’ve given SAFE a “B” rating in Portfolio Grader.
Uniti Group (UNIT)
Not all REITs have to do with consumer or commercial real estate. Some fill in the niches that come with the invisible infrastructure that keeps our mobile world moving.
Uniti belongs to this niche. It is a leading provider of communications infrastructure for all aspects of the telecommunications industry. That means it owns towers, repeaters, fiber and other assets that serve the telecom sector throughout the eastern and central U.S.
The sheer fact that it lists on the tech-heavy NASDAQ rather than the REIT-standard NYSE tells you that it sees itself as a tech company as much as an REIT.
The stock is up 61% in the past year, yet it still delivers a 5.7% dividend. It’s in the right place at the right time, making it a perfect pick for my list of top real estate stocks.
UNIT has a “B” rating and a buy recommendation in Portfolio Grader.
Innovative Industrial Properties (IIPR)
It’s hard to believe how fast the cannabis industry is growing in the U.S. and Canada. But there are challenges when it comes to legalizing cannabis under state law but not under federal law.
One of those is banking. Federally insured banks can’t take money from cannabis growers, retailers or wholesalers. That may change as more and more states legalize marijuana for medicinal or recreational purposes. Plenty of states see the tax income from legalization as a big help in these difficult times.
One way around the state/federal dilemma is to invest in a company that leases property to growers in states where it’s legal. That’s what Innovative Industrial Properties does. It’s a weed REIT.
And that has been a very good business as of late. IIPR stock is up 109% in the past year and still has a 3.2% dividend. So put that in your pipe and smoke it.
IIPR has a “B” rating in Portfolio Grader.
On the date of publication, Louis Navellier has a long position in SAFE in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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.