Real Estate Rebound: Top 3 REITs for Robust Returns in 2024

Stocks to buy

After a wild year in the books, investors might want to consider the top REITs or real estate investment trusts to buy. Structured as companies that own or finance income-producing real estate often across a range of property categories, acquiring a quality REIT can be a sensible idea. Further, possible shifting tides in 2024 arguably enhance the opportunity.

For one thing, the much-anticipated recession that Wall Street feared last year simply didn’t materialize. That’s not to say that economy skipped to a happy beat. However, circumstances could have been much worse. By avoiding a devastating bullet, both consumers and investors may feel more confident. And that could benefit certain REITs to buy.

Second and most importantly, the Federal Reserve has hinted at the possibility of interest rate cuts this year. Nothing is set in stone and circumstances could change. But it also represents a clear pivot from the earlier hawkish stance.

If dovishness does ultimately reign supreme, these are the top REITs to buy.

W.P. Carey (WPC)

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A diversified net-lease REIT, W.P. Carey (NYSE:WPC) primarily invests in single-tenant properties whereby the tenant is responsible for most of the associated operating expenses. That includes property tax, insurance, and maintenance. It covers several property types, most notably industrial and warehouse. Also, it features significant exposure to retail businesses, such as grocery outlets and drugstores.

Fundamentally, WPC might benefit from the possible consumer sentiment boost tied to reduced interest rates. Consider that during the holidays, many folks continued to open their wallets. It’s just that the mechanism for payment – using buy now, pay later (BNPL) platforms – changed. Presumably, then, reducing the onerous obstacle of high interest rates should boost spending.

The thesis also makes sense because the labor market has been surprisingly robust. So again, any obstacles challenging spending being mitigated should make WPC one of the top REITs to buy. To sweeten the pot, shares trade at only 11.21X funds from operations (FFO), lower than the sector median 13.45X.

Weyerhaeuser Company (WY)

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A timberland company, Weyerhaeuser Company (NYSE:WY) owns nearly 12.4 million acres of timberlands in the U.S. Further, its public profile states that the enterprise manages an additional 14 million acres under long-term licenses in Canada. Notably, it’s been in business since 1900. So, from a dependability standpoint, WY presents a great candidacy for top REITs to buy.

As for the underlying forestry and logging business, the sector’s market valuation reached $322.25 billion globally. By 2028, the segment should hit $437.39 billion. If so, that would come out to a compound annual growth rate (CAGR) of 6.3%. What’s more, lower interest rates could potentially help boost the timberlands industry. For example, greater financing accessibility for residential real estate could lift demand for wood products.

To be sure, with a price-to-FFO ratio of 21X, WY doesn’t necessarily offer a discount. However, it features strong revenue and EBITDA growth. Plus, analysts rate shares as a consensus moderate buy, making it worth a second look.

Tanger (SKT)

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While I could go with a bread-and-butter idea for top REITs to buy to finish off this list, I’ve made the decision to go the speculative route with Tanger (NYSE:SKT). A REIT focused on shopping centers, Tanger enjoyed a significant rise in the second half of 2023, gaining over 25% of equity value. For the year, SKT moved up almost 57%.

Naturally, SKT raises concerns about holding the bag. Conspicuously, analysts rate shares a consensus hold with a $24.60 average price target. That translates to more than 11% downside risk. If you’re looking for a confidence booster SKT doesn’t quite fit the bill. However, the possible monetary policy pivot could favor the REIT.

As stated earlier, consumers continued to spend during the holidays. However, some data exists that suggests rising prudence during the difficulties last year. Notably, the personal saving rate increased from 3.3% in November 2022 to 4.1% in November 2023. This might indicate greater breadth for discretionary spending. If so, SKT could be one of the top REITs.

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.

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