3 REITs to Buy Now to Combat Higher Inflation

  • Duke Realty: Has an occupancy rate of 98%, driven primarily by the rise in e-commerce.
  • EPR Properties: Enjoys a total rent collection at 97% of contractual levels.
  • VICI Properties: Close to all rental agreements have automatic escalators based on the consumer price index (CPI), so when the CPI rises, so do rents.
Real estate investment trust REIT on an office desk.

Source: Vitalii Vodolazskyi / Shutterstock

Real estate investment trusts (REITs) offer a safe haven for investors concerned about soaring inflation. Numbers released by the U.S. Bureau of Labor Statistics show inflation has hit a four-decade-high of 7.9%. Therefore, market participants have not been to shy to put money into robust REITs.

As a result, REITs outperformed the broader market in 2021. Recent research by S&P Global (NYSE:SPGIsuggests, “As of Dec. 13, the Dow Jones Equity All REIT Index showed total annual growth of 34.8%, while the S&P 500 showed growth of 26%.”

This study also suggests that property types that can raise rents quickly are more likely to attract investor interest in 2022. Examples include multifamily, hospitality, and self-storage.

Legally enforceable lease agreements mean that a REIT’s rental cash flows are protected by law. Meanwhile, their growing cash flows from rent increases often bolster dividends that could help beat inflation.

With that information, here are three REITs to buy that could deliver generous returns amidst today’s volatile markets:

DRE Duke Realty Corporation $59.20
EPR EPR Properties $55.12
VICI VICI Properties $29.01

REITs to Buy: Duke Realty Corporation (DRE)

Duke Realty (DRE) corporate headquarters. Duke Realty owns and operates more than 149 million square feet of logistics properties.

Source: Jonathan Weiss / Shutterstock.com

Our first stock, Duke Realty Corporation (NYSE:DRE), owns a portfolio of about 550 industrial properties with over 160 million square feet of space across key logistics markets. Prominent tenants include Amazon (NASDAQ:AMZN), Home Depot (NYSE:HD), United Parcel Service (NYSE:UPS), and Target (NYSE:TGT).

Duke Realty announced fourth quarter (Q4) 2021 results on Jan. 26. Revenue remained almost flat year-over-year (YOY) at $256 million. Funds from operations (FFO) increased to 44 cents per diluted share, up from 40 cents per diluted share for the prior-year quarter.

The rise of e-commerce combined with supply chain issues has accelerated demand for industrial real estate. In 2021, FFO increased 13.8%, while occupancy stood at 98%, thanks to record leasing volume. Looking ahead, management is anticipating an FFO per share increase of 9.8% this year.

DRE stock has returned around 39% over the past year. Now, shares are trading at an expensive 75.2 times forward earnings and 20 times trailing sales.

Therefore, we could possibly see short-term profit-taking soon, making this one of the best REITs to buy. The 12-month median price forecast for DRE stock stands at $65.50.

EPR Properties (EPR)

hand of person in a suit dangling keys with a house symbol on the ring. Windows overlooking city skyline in background.

Source: ImageFlow/shutterstock.com

Next up is EPR Properties (NYSE:EPR), a net-lease REIT. It has a diverse portfolio of leisure and experiential real estate, including movie theaters, gaming facilities, amusement parks, and ski resorts.

EPR issued Q4 2021 results on Feb. 22. Total revenue soared 66% YOY to $154.9 million. Adjusted FFO came in at $83.3 million, or $1.11 per share, up from $17.4 million in the prior-year quarter. Cash and equivalents ended the period at $288.8 million.

Rent collections were at the high end of expectations at 97% of contractual levels. For fiscal 2022, the REIT anticipates spending between $500 to $700 million in new investments, targeting gaming properties, cultural attractions, and entertainment venues. As a result, management is projecting FFO to rise by 42%.

EPR stock is up 16% year-to-date (YTD) and currently generates an attractive 5.89% dividend yield. Shares are trading at 23 times forward earnings and 7.3 times trailing sales. The 12-month median price forecast for EPR stock is at $58.

REITs to Buy: VICI Properties (VICI)

Person holding mobile phone with logo of American real estate company Vici Properties Inc. on screen in front of web page. VICI stock.

Source: T. Schneider / Shutterstock

Our final stock, VICI Properties (NYSE:VICI), is one of the largest gambling and entertainment REITs worldwide. The company owns 43 properties with 4 million square feet of casino space.

VICI Properties released Q4 2021 results on Feb. 23. Revenue increased 2.7% YOY to $383 million. Adjusted FFO came in at $278.9 million, or 44 cents per share, compared to $252 million in the prior-year quarter. Cash and equivalents ended the period at $739.6 million.

97% of VICI’s rental agreements have automatic escalators based on the CPI. Therefore as inflation increases, so do the rents collected.

Meanwhile, VICI is on track to close its acquisition of MGM Growth Properties (NYSE:MGP). The deal will add seven premier Las Vegas resorts to its portfolio, including MGM Grand, Mandalay Bay, and Luxor.

VICI stock is down 3.5% YTD. The current price supports a dividend yield of 4.98%. Shares are trading at 13.2 times forward earnings and 10.4 times trailing sales. The 12-month median price forecast for VICI stock stands at $35.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.

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