Based

Reserve

Crown

Castle

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 Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our&nbsp;<a href="https://tokenist.com/terms-of-service/" style="text-decoration:underline;color:#3c7b7b" target="_blank" rel="noreferrer noopener" class="deco-link">website policy</a>&nbsp;prior to making financial decisions.
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<p class="has-drop-cap">When the Federal Reserve began its interest rate hiking cycle in March 2022, the real estate investment trust (REIT) sector took a dive. Between 1972 and 2022, US-based REITs delivered a respectable average annual return of <a aria-label=" (opens in a new tab)" href="https://www.reit.com/data-research/reit-indexes/annual-index-values-returns" target="_blank" rel="noreferrer noopener nofollow" class="deco-link">11.26%</a>.&nbsp; As such, REITs are often picked for steady <a href="https://tokenist.com/investing/dividend-growth-investing/" rel="dofollow" class="deco-link">passive income</a>.</p> 
<p>This completely inverted with the hiking cycle, as the S&amp;P Global REIT index yielded a -1.49% three-year annualized return. Year-to-date, this sector is barely above water, at <a aria-label=" (opens in a new tab)" href="https://www.spglobal.com/spdji/en/indices/equity/sp-global-reit/#overview" target="_blank" rel="noreferrer noopener nofollow" class="deco-link">+0.24%</a> return. Industrial and retail REITs make up the bulk of the sector, at 18.7% and 18.4%.</p> 
<p>Multi-family residential REITs hold 9.3%, while diversified, data center, health care, and office REITs are all within the 8% weight range. Due to the remote work trend, leftover from the lockdown period, office and infrastructure performed the worst, while small-cap REITs outperformed at +8.59% returns in June 2023.</p> 
<p>That month, Fitch downgraded the REIT sector from “neutral” to “deteriorating.”&nbsp; Nonetheless, REITs have been a popular investment vehicle due to the 90% rule. Because these trusts are obligated to distribute 90% of taxable income to shareholders as dividends, they are exempt from corporate income taxes.</p> 
<p>Moreover, REIT dividends have ordinary income status with a maximum capital gains tax of 20% (added to <a aria-label=" (opens in a new tab)" href="https://investor.vanguard.com/investor-resources-education/taxes/medicare-surtax" target="_blank" rel="noreferrer noopener nofollow" class="deco-link">3.8%</a> Medicare surtax). Taking all these factors into account, in addition to expected <a aria-label=" (opens in a new tab)" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html" target="_blank" rel="noreferrer noopener nofollow" class="deco-link">rate cuts</a> in 2024, which REIT stocks are sensible for investors right now?</p> 
<p>All three show signs of recovery over the month: O (+5.7%), PLD (13.6%) and AMT (+10.6%).</p> 
<h3 id="realty-income-corp-nasdaq-o">Realty Income Corp. (NASDAQ: O)</h3> 
<p>This REIT mainly focuses on retail and net-leased commercial real estate. The net-leasing model is attractive for investors because all operating costs (tax, insurance, maintenance) go to tenants. This is why Realty Income has had a consistently high dividend payout history, presently at a 5.62% annualized return.</p> 
<p>Moreover, the trust has a history of high portfolio occupancy, rarely under 95%. As of the September 30th report, Realty Income holds over 13,250 properties with a 98.8% occupancy. Although the trust is mainly US-based, it also has properties in Spain, Italy, Ireland, and the UK for diversification across 85 sectors.</p> 
<p>Realty Income has a higher <a href="https://tokenist.com/investing/p-e-ratio/" rel="dofollow" class="deco-link">price-to-earnings ratio</a> of 41.16 compared to the REIT average of ~20 P/E. This indicates that investors are willing to pay a premium for a high dividend yield annually at $3.072 per O share.</p> 
<p>Based on 18 analyst inputs pulled by Nasdaq, O stock is a “buy.” The average O price target is $57.83 vs the current $53.92. The high estimate is $67.5, while the low forecast is $48 per share.</p> 
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<h3 id="prologis-inc-nasdaq-pld">Prologis, Inc. (NASDAQ: PLD)</h3> 
<p>Focusing on the industrial and logistics sector, Prologis delivers an annual dividend of $3.48 per PLD share (2.93%). A lower price-to-earnings ratio of 36.67 P/E makes Prologis even more enticing.&nbsp;</p> 
<p>For the tumultuous fiscal year 2022, Prologis reported 98% average occupancy with 82.4% retention. The important core Funds From Operations (FFO) cash flow metric showed improvement in 2022 compared to 2021, at $5.16 vs $4.15 per diluted share respectively.&nbsp;</p> 
<p>For the full year 2023, Prologis’ guidance for core FFO is between $5.58 and $5.60 per share, as of the latest boosted <a aria-label=" (opens in a new tab)" href="https://www.nasdaq.com/articles/prologis-boosts-fy23-core-ffo-outlook-update" target="_blank" rel="noreferrer noopener nofollow" class="deco-link">update</a> in October.</p> 
<p>Based on 24 analyst inputs pulled by Nasdaq, PLD stock is a “strong buy”. The average PLD price target is $131.76 vs the current $118.85. The high estimate is $154, while the low forecast is above the present price at $119.&nbsp;<br></p> <iframe src="https://tokenist.substack.com/embed" width="100%" height="320" style="border:1px solid #EEE; background:white;" frameborder="0" scrolling="no"></iframe> 
<h3 id="american-tower-corp-nasdaq-amt">American Tower Corp. (NASDAQ: AMT)</h3> 
<p>Like recently boosted <a href="https://tokenist.com/crown-castle-shares-up-at-market-open-after-activist-investor-vows-to-change-things/" rel="dofollow" class="deco-link">Crown Castle (CCI)</a>, American Tower heavily invested in wireless communications infrastructure. Following a similar revenue model, AMT generates revenue from cell tower leasing to wireless carriers and acquisitions, maintenance, and engineering services.&nbsp;</p> 
<p>Compared to March 2021, AMT cut in half its debt-to-equity ratio, from 6.45 to 3.16 as of this September. Of the three REITs listed here, AMT offers the highest annual dividend payout at $6.48 per share (3.08%), given that its stock is priced much higher.</p> 
<p>As of the November Q3 earnings report, American Tower reported a 5.5% revenue uptick to $2.8 billion. 2022 the REIT reported double-digit funds from operations (FFO) at 11.1% ($5.27 billion). For the <a aria-label="latest Q3 quarter (opens in a new tab)" href="https://americantower.gcs-web.com/news-releases/news-release-details/american-tower-corporation-reports-third-quarter-2023-financial" target="_blank" rel="noreferrer noopener nofollow" class="deco-link">latest Q3 quarter</a>, FFO growth was at 5%.</p> 
<p>AMT’s high P/E ratio of 137.73 is due to its sector, from which investors expect high 5G network growth.</p> 
<blockquote class="wp-block-quote"> 
 <p>“As the 5G investment cycle continues and data consumption growth persists, we remain focused on driving attractive organic growth rates across our existing portfolio.”</p> 
</blockquote> 
<p>Based on 19 analyst inputs pulled by Nasdaq, AMT stock is a “strong buy.” The average AMT price target is $214.5 vs the current $205.45. The high estimate is $259, while the low forecast is $169 per share.</p> 
<p><strong><em>Do you prefer to hold and trade equities or rely on dividend payouts? Let us know in the comments below.</em></strong></p> 
<p>The post <a rel="nofollow" href="https://tokenist.com/three-reit-stocks-to-consider-holding-in-2024/">Three REIT Stocks to Consider Holding in 2024</a> appeared first on <a rel="nofollow" href="https://tokenist.com">Tokenist</a>.</p>

Three REIT Stocks to Consider Holding in 2024

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