- Alpine (PINE) – It has solid anchors as tenants and boasts an astounding 100% occupancy rate since inception.
- Agree Realty (ADC) – A diversified option with retail exposure, meaning it can charge on a percentage sales basis in addition to base rent.
- ARMOUR (ARR) – A debt REIT option that exploits higher mortgage rates through MBS’. Its 15.08% dividend yield is its biggest appeal.
Finding the right REITs to buy can make all the difference as inflation mounts. The rhetoric that investment portfolios suffer during inflationary periods is a myth tied to the way too many people think about investing.
In fact, real estate investment trusts are a great option right now as their market values correlate with inflation. Rental income and property appraisals increase along with inflation, whereas the earnings of companies tend to decline in the same period.
REITs exhibit negative correlations with most other assets classes such as stock and bonds, thus making them an excellent conviction play. They also provide high dividend yields as they must redistribute most of their rental income to qualify as REITs.
Here are three REITs that I handpicked.
|PINE||Alpine Income Property Trust||$18.80|
|ADC||Agree Realty Corporation||$71.30|
|ARR||ARMOUR Residential REIT||$7.57|
REITs to Buy: Alpine Income Property Trust (PINE)
Alpine (NYSE:PINE) acquires and operates high-end net leased properties across the United States.
The REIT has solid anchors to its properties, with reputable brands such as Wal-Mart (NYSE:WMT), Kohl’s (NYSE:KSS), and Dollar General (NYSE:DG) as lessees. Furthermore, net leased properties provide sustainable income as most of the operating costs are paid by the lessee.
The latest available data shows that this REIT’s current leased properties have reached 129 compared to 116 last year, and it has maintained its 100% occupancy rate since listing as a public entity in 2019. Additionally, PINE’s 12.19% year-over-year increase in base rent illustrates how REITs thrive in an inflationary environment.
PINE’s price to funds from operations ratio of 11.74x suggests that it’s undervalued. And its forward dividend yield of 5.78% takes some beating. I see this as a well-rounded asset that could outperform the market due to its systemic and idiosyncratic alignment.
Agree Realty Corporation (ADC)
Agree Realty (NYSE:ADC) also works on a net lease basis but holds a slightly larger portfolio than Alpine.
Agree Realty has acquired and operates more than a thousand properties across 45 states.
The company’s ethos is retail-centric, which allows it to charge a percentage of sales to some of its tenants in addition to base rent.
ADC ended its previous financial year with adjusted funds from operations worth 91 cents per share, a 9.2% annual increase.
The real estate giant gathered 29.1% of its base rents from ground leases, contributing to a firm-wide net income of $1.78 per share. The REIT pays a substantial dividend at a payout ratio of 146.29% at a forward yield of 4.01%.
Agree Realty is a sustainable income-generating investment, as illustrated by its dividend sustainability, which now spans over 27 consecutive years. ADC has formed a momentum trend as its trading above its 10-, 50-, 100-, and 200-day moving averages, suggesting that its a prime inflation play.
REITs to Buy: ARMOUR Residential
ARMOUR (NYSE:ARR) provides a different option from the previous two REITs. This is a debt REIT that derives its income and value from underlying mortgages.
ARR primarily invests in residential fixed-rate, adjustable, and hybrid rate securities that are backed by U.S.-sponsored enterprises.
With 30-year mortgage rates now touching 5.00%, this could be an excellent time to invest. Sure, higher mortgage rates could mean higher mortality, but ARR is a diversification vehicle that nearly eliminates mortality risk. Thus, it benefits from higher rates regardless of economic circumstances.
ARR is an underappreciated asset and is a pure income play that could also produce capital gains from systemic support.
ARMOUR has a humongous forward dividend yield of 15.08% at a payout ratio of 125%. This could be a tremendous tactical play for those betting on rising interest rates.
On the date of publication, Steve Booyens did not hold any position (either directly or indirectly) 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.