If you are looking for an investment option that focuses on consistent income and long-term capital appreciation, then investing in real estate investment trusts (REITs) is a good idea. These trusts own pools of income-generating properties in a wide range of industries, and there are over 200 publicly traded REITs in the market today. Despite their diversity in holdings and business models, they all have one thing in common: the requirement to pay at least 90% of their taxable income as dividends to shareholders each year. While they are typically resilient, some REITs have struggled recently due to high interest rates that make financing their own operations more expensive and hurt many of their tenants.
However, the current market has created bargains for investors seeking to invest in the REIT sector. In this article, we’ll take a look at three top REIT stocks that are worth considering: American Tower, Federal Realty Trust, and Realty Income.
American Tower is a global REIT and one of the largest providers of wireless communication infrastructure. With the rapid growth of 5G networks and artificial intelligence, American Tower is expected to continue its record of outperformance. Federal Realty Trust, though much smaller than American Tower, has managed to pay out dividends every month for 634 straight months and has raised its payout for 30 straight years. It is also one of the few REITs on the exclusive list of Dividend Kings. Realty Income, on the other hand, is self-branded as “The Monthly Dividend Company” and has been paying dividends for 55 straight years. It has expanded its portfolio by acquiring over 12,200 properties across various countries.
Despite the recent struggles in the REIT sector, these top three trusts have performed well and have positioned themselves to outperform the market over the long term. Therefore, buying stocks of these companies could be a good investment for anyone interested in reliable flow of dividend payouts and good prospects for share-price growth over time.
Analysts consider each of these trusts “moderate buys” and give them average target prices to be 21% to 35% above their recent trading prices. In addition, their dividend payout ratios, based on cash flow, range from 51% for Federal Realty Trust to 76% for Realty Income, highlighting the ability of each of these companies to cover their dividend obligations from cash generated from operations.
Investing in American Tower, Realty Income, and Federal Realty Trust could be a wise decision for anyone looking for a moderate-risk, moderate-reward investment with higher chances of giving long-term gains.
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