REIT stocks have not been the best performer lately and I don’t know when that observation will change. That said, income-oriented investing cannot exclude this group, as the yields and payouts are simply too attractive.
The stock market is in a tough spot. On the one hand, we’ve had a hot start to 2023, but it’s only being led by a handful of stocks. On the other hand, we’re not necessarily out of the woods. Rates continue to rise and there’s finally some economic risk (both from the regional banks and from the economy).
That leaves REITs (and the stock market) in a tough place. Additionally, commercial real estate is facing a serious risk, as office space supply remains way too high. This is causing stress in the commercial real estate space — something that’s garnered attention but continues to get ignored by the overall market.
How will that impact the best REIT stocks to buy now? Honestly, I don’t know. But I do know that there are a handful of REITs that have been consistent with their payouts and will be consistent through whatever mess we face in the next 12 to possibly 24 months.
Realty Income (O)
Known as The Monthly Dividend Company, Realty Income (NYSE:O) is a fan favorite in the REIT community. And why shouldn’t it be? The stock currently pays out a dividend yield of a little under 5% and it pays out its distribution monthly instead of quarterly. Even better, the company has raised its dividend for 102 consecutive quarters (more than 25 years) and has paid its monthly dividend consecutively for more than 52 years!
That’s a really impressive feat, while management has worked hard to build a strong and diverse group of tenants in markets that have generated consistency.
One knock? The stock suffered a peak-to-trough decline of about 47% during the Covid-19 selloff. Not only did that lag the major US indices, but the stock never went on to take out those highs while many stocks did take out their pre-Covid highs.
Regardless, long-term shareholders should be rewarded by this firm as its consistency is hard to beat.
Federal Realty (FRT)
Another name that consistently finds itself in the discussion of the best REIT stocks to buy? How about Federal Realty (NYSE:FRT).
The company pays out a 4.5% dividend yield and, for the longest time, finding any yield in this name over 4% was nearly impossible. In fact, a number of years went by where finding a yield above 3% was a tough ask!
Despite its relatively modest market capitalization of $7.85 billion, this firm has been around paying dividends for a long time. According to the company, “With over half a century of dividend increases year after year, we hold the single longest annual dividend growth record among all REITs.”
The company points out that the streak includes raising the dividend through oil embargos, periods of high inflation, a financial crisis and several recessions. It has now raised its dividend in 55 consecutive years.
Extra Space Storage (EXR)
I don’t know about you, but there was a time in my life where I needed to temporarily store some items that simply would not fit at my home. Thinking this would be an easy task to solve, I went online, found a storage unit company and gave them a call. No space. So I called another, and another, and another…
You get the idea. That’s when it really dawned on me what a great operation the storage unit business has become. That’s why I like Extra Space Storage (NYSE:EXR). The stock pays a 4.19% dividend yield and while it’s not as impressive as O or FRT, it has raised its dividend in 13 straight years.
When the company recently reported earnings, its funds from operations (or FFO) slightly missed consensus expectations, while revenue grew more than 13% year-to-year to just over $500 million.
Going forward, Extra Space Storage should continue to have impressive growth. The company is the second-largest self-storage operator in the US and “in the last 5 years, we added 4.6 billion dollars in new acquisitions to our national portfolio.”
On the date of publication, Bret Kenwell 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.