At first blush, the case for reliable REITs – that is, real estate investment trusts – might not seem relevant. After all, the U.S. jobs market continues to print impressive figures that beat analysts’ estimates. Still, as a Forbes article pointed out, despite a strong jobs print, recession concerns still exist.
As CNBC explained, a divergence now exists between falling oil prices, rising gold prices and a boost in the 10-Year Treasury yield. The former two events indicate that a recession may impact the U.S. economy. However, the latter indicator implies hopes for a soft landing. In other words, the ambiguity presents a case for property investment opportunities.
Thanks to their distinct structure, REITs are required to distribute at least 90% of their taxable income to shareholders as dividends. Further, these enterprises tend to align themselves with industries benefitting from predictable demand streams. Therefore, if you don’t know what may happen next, income-generating real estate makes plenty of sense.
Recession or not, it’s always nice to have passive income to mitigate against any uncertainties. With that, below are reliable REITs to consider.
Prologis (PLD)
What it is: One of the top reliable REITs available, Prologis (NYSE:PLD) invests in logistics facilities. According to the company’s Form 10-K, Prologis is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. Further, its footprint covers 19 countries across four continents. At the moment, the company carries a market capitalization of $112.7 billion.
Relevance: Because of Prologis’ focus on high-barrier markets, it may benefit from economic insulation. Put another way, a hefty commitment exists among the REIT’s tenants, making turnover less likely. Sure enough, one of the strong points in the enterprise’s financials is consistent profitability over the past 10 years. It also posts a strong three-year revenue growth rate of 13.1%.
Pros: Right now, Prologis offers a forward yield of 2.85%. While that’s a bit lower than other property investment opportunities, the track record of consecutive dividend increases stands at 10 years.
Cons: As with other income-generating real estate plays, the focus is on income rather than capital gains.
American Tower (AMT)
What it is: Focused on the wireless and broadcast communications infrastructure field, American Tower (NYSE:AMT) features a massive footprint. According to its website, the company commands 225,000 global sites. Further, it covers 25 countries across six continents while employing around 6,000 workers. It’s also a large enterprise, featuring a market cap of nearly $96 billion, making it a comfortable prospect for reliable REITs.
Relevance: Unless you envision a world where telecommunications and wireless initiatives will regress, American Tower should be relevant. According to Precedence Research, the global wireless infrastructure market reached a valuation of just over $160 billion last year. By 2032, experts project that the sector could hit a valuation of nearly $387 billion. Just by downwind benefits, AMT ranks among the top property investment opportunities.
Pros: Combined with a growing underlying industry, AMT offers a forward dividend yield of 3.15%. As well, the company enjoys 12 years of consecutive dividend increases, making it an overall attractive idea for income-generating real estate.
Cons: While AMT rates as a strong buy, upside potential is limited based on the $217.83 average price target.
Stag Industrial (STAG)
What it is: Headquartered in Boston, Massachusetts, Stag Industrial (NYSE:STAG) is one of the reliable REITs focused mainly on the e-commerce revolution. Per its website, the REIT targets acquisitions and operation of industrial properties throughout the U.S. These largely involve e-commerce and logistics properties, thus benefitting from a pertinent growth market.
Relevance: Back in the second quarter of 2020, e-commerce sales represented 16.5% of all retail transactions. Of course, that stemmed from the surge in retail revenge (basically retail therapy). However, the blistering demand faded as society acclimated to the Covid-19 crisis. However, this metric is back on the rise, hitting 15.6% as of Q3 2023. Indirectly, the upswing makes STAG an intriguing idea for property investment opportunities.
Pros: True to this theme, Stag provides a forward yield of 4.05%. Now, the payout ratio is a bit high at 183.71% even for a REIT. Nevertheless, the continued rise of e-commerce should steadily boost STAG.
Cons: With STAG having performed relatively well this year, the upside potential inherent in the analysts’ consensus target of $38.25 is limited.
Federal Realty Investment Trust (FRT)
What it is: Based in Rockville, Maryland, Federal Realty Investment Trust (NYSE:FRT) is one of the reliable REITs investing in shopping centers in the northeastern region of the U.S. As well, Federal Realty covers the Mid-Atlantic states along with California and South Florida. Fundamentally, it enjoys a mixed geographic footprint that may enable it to benefit from millennial migration trends.
Relevance: As stated earlier, the geographic footprint should be a tailwind for Federal Realty. Per its website, its California-focused properties cover Silicon Valley and Southern California. These represent major components of the economic engine that is the Golden State. In addition, its properties in Phoenix, Arizona should add relevance to FRT as younger people move for cost-of-living reasons.
Pros: An attractive idea for property investment opportunities, FRT carries a forward yield of 4.39%. Also, it commands 56 years of consecutive dividend increases. There’s no way that management will want to give up this lofty status.
Cons: While enticing, Federal Realty lacks diverse property holdings compared to other income-generating real estate.
Agree Realty (ADC)
What it is: Hailing from Farmington Hills, Michigan, Agree Realty (NYSE:ADC) focuses on neighborhood shopping centers with strong anchor tenants. Though the Covid-19 crisis negatively impacted such businesses during the initial wave, society has mostly normalized. Therefore, Agree might benefit from the acclimatization along with the everyday predictable demand profile that such properties exhibit.
Relevance: Again, Agree comes down to serving everyday needs, which makes ADC a solid candidate for reliable REITs. Looking at its financials, the company posts a three-year revenue growth rate of 6.1%, beating out nearly 73% of its peers. Also, Agree unsurprisingly enjoys consistent profitability over the trailing decade. Unless you envision a future where physical shopping becomes obsolete, Agree should be considered one of the top property investment opportunities.
Pros: Right now, the REIT offers a forward dividend yield of 5%. That’s noticeably above the sector average yield of 4.46%. Also, analysts rate shares a strong buy with a $64.53 average price target.
Cons: As with Federal Realty, Agree isn’t quite as diverse as other REITs. Therefore, exposure to consumer sentiment exists.
NNN REIT (NNN)
What it is: One of the more riskier ideas for reliable REITs, NNN REIT (NYSE:NNN) will require patience. Per its public profile, the entity primarily invests in high-quality properties that are subject to long-term triple-net (NNN) leases. According to Investopedia, this is a type of lease agreement on a property “whereby the tenant or lessee promises to pay all the expenses of the property, including real estate taxes, building insurance, and maintenance.”
Relevance: Fundamentally, the advantage for investors of targeting NNN stock centers on the underlying long-term leases. In addition, market participants may benefit from a diversified tenant base, possibly providing economic insulation. Regarding the financials, National Retail gets the job done with a 2.4% three-year revenue growth rate. However, the real star centers on robust margins and consistent profitability.
Pros: If you’re looking for high yields, you’ve come to the right place. NNN carries a forward yield of 5.57%. In addition, the REIT commands 34 years of consecutive dividend increases.
Cons: If you’re looking for high capital gains potential, you’ve come to the wrong place. NNN is a consensus hold with a measly $41.79 average analyst price target.
Realty Income (O)
What it is: Another compelling but risky idea for reliable REITs, Realty Income (NYSE:O) is looking at a year-to-date loss of almost 15%. For conservative investors seeking primarily passive income, that might not cut it. However, Realty focuses on free-standing, single-tenant commercial properties tied to largely to critical businesses such as grocery stores.
Relevance: Frankly, the brands that do business with Realty Income speak inherently to the relevance of the enterprise. Unless you envision a future where humans no longer buy groceries, Realty should perform well over the long run. Also, discount retailers do business with the REIT, meaning that there could be added relevance due to the challenging environment.
Pros: When it comes to reasons for buying O stock, Realty carries two advantages. First, the company offers a robust forward yield of 5.65%, noticeably above the sector average of 4.46%. Second, it pays this passive income on a monthly basis instead of the typical quarterly basis.
Cons: Besides the market volatility, the consensus moderate buy rating is a bit lackluster. We’re talking four buys and six holds, which doesn’t scream confidence.
On the date of publication, Josh Enomoto 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.