The real estate investment trust (REIT) universe could be worth monitoring this summer as investors hope for the Federal Reserve to deliver the first interest rate cut. Undoubtedly, there’s a lot more to REITs than just where interest rates are headed next. In this piece, we’ll check in with three intriguing REITs that have been taking steps to improve upon aspects within their control.
Undoubtedly, higher rates are a negative for many firms, including the REITs. But at the end of the day, you can’t control what Fed Chairman Jerome Powell does next. The best REITs to buy on weakness, I believe, have plans to improve, regardless of how the macro conditions fare. While it’s impossible to escape the pull of such headwinds completely, it is possible to navigate them gracefully en route to a future pivot.
Here are three REITs on the top of my income-focused watchlist for May 2024.
American Tower (AMT)
American Tower (NYSE:AMT) shares have been quite the dud so far in 2024, now down 17% year to date. With the cell tower REIT at risk of revisiting last year’s multi-year lows, investors may be wondering if it’s time to throw in the towel. Now that shares have shed over 40% from all-time highs, I’m inclined to give AMT stock the benefit of the doubt.
Further, after the recent Raymond James upgrade over its growth profile, American Tower stands out as one of the most intriguing REITs to scoop up in May. As a part of the upgrade, Raymond James noted that American Tower was “primed for the best growth” of its peer group “over the next three years.”
With a nice 3.63% yield and substantial ground to recover, the $83.4 billion tower REIT certainly stands out as an impressive pick for income-focused investors.
Crown Castle International (CCI)
Crown Castle International (NYSE:CCI) is another cell tower REIT worth considering this May. Though its growth prospects may not be as impressive as American Tower’s, CCI shares have more yield (6.53% at writing) and a seemingly cheaper multiple. Indeed, value and income are the main draws to Crown Castle. But are these attractions enough to forgive the REIT’s relative growth shortcomings?
Crown Castle’s latest first quarter was in line with expectations. Nothing truly impressive, but really nothing to hit the sell button over, either.
Now down 54% from its all-time highs, Crown Castle stands out as deeply undervalued, with potentially sizeable upside once the Fed is finally ready to slash interest rates.
If you’re looking to bet on a falling-rate environment, I think CCI stock is one of the best ways to do it. The company has been feeling the pinch of higher rates a tad more than most other firms. Once the tides turn, I’m inclined to believe Crown Castle will feel more weight lifting off its shoulders.
Simon Property Group (SPG)
Shopping mall real estate REIT Simon Property Group (NYSE:SPG) has been in recovery mode over the last year, gaining around 32% in the timespan. With a 5.4% yield, a modest price of admission and a solid first-quarter showing to build off of, SPG shares deserve to be on the watchlist of REIT investors.
For the first quarter, Simon Property delivered a nice beat alongside a quarterly dividend increase. To add sugar on top, management also increased its full-year guidance, now expecting 2024 funds from operations (FFO) per share to be in the $12.75 to $12.90 range, up from $11.85 to $12.10.
As the retail property kingpin diversifies and densifies by moving further into mixed-use real estate, I certainly wouldn’t be surprised to see shares continue gravitating higher from here.
On the date of publication, Joey Frenette did not hold (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.
