If you’re looking for a consistent income, there are a few better choices than real estate investment trusts. Findings the right REITs to buy can be a game changer for your portfolio.
REITs are companies that either own, operate, or have an interest in real estate, such as office buildings, shopping malls, apartments, hotels, and infrastructure assets, such as warehouses, utility lines, or data centers.
REITs are favored by income investors because of their tax benefits. By law, REITs that distribute at least 90% of their taxable income aren’t subject to corporate income taxes. That means that investors can enjoy much higher yields than they would from a traditional stock.
I like REITs as an investment option because they provide stable cash flow for income investors. REITs make their money from rental income, so as long as the properties remain filled, investors can count on a decent return.
Of course, REITs fell out of favor somewhat in the last year. As interest rates climbed, many investors decided they’d rather generate their income from government-secured bonds. But now that interest rates are starting to edge down, REITs become a more appealing option.
The Portfolio Grader helps us find the best REITs to buy now by evaluating the companies on various metrics, including payout, income growth, analyst sentiment and other factors. If you’re looking for some sure-fire income in February 2024, these REITs merit consideration.
Digital Realty Trust (DLR)
Digital Realty Trust (NYSE:DLR) is a REIT that works with data centers. The company owns, operates and invests in data centers worldwide, operating 300 such centers on nearly every continent on Earth.
Data centers are growing in importance these days as generative artificial intelligence develops.
To operate generative AI applications, it will be important to access and connect cloud environments to manage the complex computations that generative AI demands.
Digital Realty Trust is the world’s biggest provider of cloud- and carrier-neutral data center solutions. Its PlatformDigital global data center platform last year unveiled its high-density colocation capabilities that are designed to handle AI workloads.
Earnings for the third quarter included revenue of $1.4 billion, up 18% from a year ago. Income of $746 million and $2.33 per share was up from 75 cents per share in the same period a year ago.
DLR has a dividend yield of 3.4% and is up 32% in the last year. It gets a “B” rating in the Portfolio Grader.
Modiv Industrial (MDV)
Modiv Industrial (NYSE:MDV) is a Nevada company that invests in industrial manufacturing facilities.
The company has 44 properties in 16 states, managing 4.9 million square feet. Some of its tenants include Taylor Fresh Foods, 3M (NYSE:MMM) and Northrop Grumman (NYSE:NOC).
It was only listed on the New York Stock Exchange a year ago, but since then invested heavily in the business. It acquired more than $214 million in industrial manufacturing assets and plans to continue its acquisition spree into the first half of 2024.
It’s also been disposing of non-industrial assets, including 22 properties valued at $120 million that it sold off in the last year. But the company says it’s not in any rush to make a bad deal. In a highly entertaining statement, the company disclosed the following:
“We are focused on recycling those assets that we do not believe are a strategic long-term fit but at the same time we are also not in a rush to throw away good AFFO just to clear these assets off the books. Given that we still hold office assets and office has become a six-letter curse word, one might think we would be verklempt and, in turn, hasty in our retreat. We are not. … If parties are kicking the tires of our office assets in today’s market, then that suggests to us that interested parties will also likely kick the tires at a later time when the market landscape has settled and after we have collected more of our contractual rents. We aren’t being stubborn or idealistic, but we are being balanced and patient.”
With all these moves, it’s not surprising to see that Modiv’s rental income in the third quarter was $12.5 million, up from $10.3 million a year ago. However, the company showed a net loss of $6.9 million and 86 cents per share in the quarter because of its acquisitions.
Modiv appears to be on the right track. The stock pays a dividend yield of 7.6% and is up 25% in the last year. It gets a “B” rating in the Portfolio Grader.
InnSuites Hospitality Trust (IHT)
InnSuites Hospitality Trust (NYSEMKT:IHT) is an Arizona REIT that invests in lodging. This is a small company with a market capitalization of less than $12 million, and it trades on the NYSE American exchange that is geared for small-cap stocks.
Unlike other REITs you can buy, InnSuites is hyper-focused. It has ownership of only two hotels, one in Tucson, Arizona and one in Albuquerque, New Mexico. It also provides trademark licensing to two other properties.
Revenue in the third quarter was $1.82 million, up from $1.7 million in the same period last year. Income was $90,000, down from $107,000.
But despite its size, IHT is a dependable dividend stock, making payments in 54 consecutive quarters. Its yield is 1.5%.
IHT gets a “B” rating in the Portfolio Grader.
Iron Mountain (IRM)
Iron Mountain (NYSE:IRM) is a Boston-based REIT that acts as an information management services company. The company operates data centers that store everything from historical documents to photographs and audio recordings.
The company has more than 1,000 facilities, some in locations as exotic as old iron or limestone mines. Company officials say the underground mines have an ideal temperature of 55 to 60 degrees for data storage.
The company’s network of data center infrastructure and information technology also appeals to businesses. Iron Mountain has nearly 95% of all Fortune 1000 members as customers, with a total customer base of 225,000.
Revenue in the third quarter was $$1.38 billion, up 8% from a year ago. IRM stock offers a dividend yield of 3.9% and is up 25% in the last year. It gets a “B” rating in the Portfolio Grader.
Acres Commercial Realty (ACR)
Acers Commercial Realty (NYSE:ACR) originates, holds and manages commercial real estate mortgage loans and other commercial real estate investments.
The company, based in New Hampshire, operates across the U.S., with more than $168 million in investments in office buildings, apartment buildings, hotels and student housing.
Revenue in the third quarter was $24 million, up from $20.9 million a year ago. Income was $2.9 million, or 33 cents per share, making it one of the more interesting REITS to buy.
Acres also pays a quarterly dividend of 7.8% on its Series D preferred stock and an 8.6% dividend on its Series C preferred stock. ACR stock gets a “B” rating in the Portfolio Grader.
Angel Oak Mortgage REIT (AOMR)
Angel Oak Mortgage REIT (NYSE:AOMR) buys and invests in first-lien non-qualified loans and mortgages, meaning loans that don’t meet the requirements of standard loan programs. Usually, that’s because the borrower has a non-standard income stream, such as being an independent business owner or contractor.
While that means Angel Oak is taking on some additional risk, non-qualified loans typically also come with larger down payments and/or interest rates, which makes them appealing for investors. Angel’s business strategy calls for it to securitize at least one loan per quarter, which helps provide funds to reinvest and grow the company.
Income for the third quarter was $8.3 million, with distributable earnings of 35 cents per share. AOMR pays a strong dividend yield of 12.5% and gets a “B” rating in the Portfolio Grader.
Digital BridgeGroup (DBRG)
Digital BridgeGroup (NYSE:DBRG) is another of the best REITS to buy that works in the data center space. It owns, invests in and operates cell towers, data centers and associated infrastructure.
Digital currently invests in 47 companies and manages $75 billion in digital infrastructure assets. The company works to leverage its experience within digital verticals to give it an advantage in growing its company as businesses increasingly turn to digital solutions.
Revenue for the third quarter was $477 million, up from $429 million a year ago. Net income was $261 million and $1.49 per share, up from $63.7 million and 7 cents per share in the same period last year.
Digital BridgeGroup pays a small but consistent dividend with a yield of 0.2%. It gets a “B” rating in the Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
