Real estate investment trusts, or REITs for short, are popular investments for a few reasons.
- For starters, as real estate companies they have large property portfolios with tangible values that can’t be devalued overnight by a new competitor or a change in consumer tastes.
- Also, they are a special class of investment that gets preferential tax treatment in exchange for a mandate that they deliver 90% of taxable income back to shareholders. This creates a guarantee for big dividends, and a bit more reliability for shareholders than smaller or growth-oriented names that don’t generate material profits.
REITs are incredibly attractive to many investors in 2022 because of the above factors. If you’re looking to smooth out some of the volatility in an otherwise choppy market, consider these nine top REITs. @$$4$
- Claros Mortgage Trust Inc. (CMTG): Dividend yield: 7.9%
- Claros is a mortgage-focused real estate investment trust. Unlike some of the other names out there in the mortgage industry, this nearly $3 billion REIT focuses mostly on commercial real estate loans in major U.S. cities instead of residential mortgages. When possible, it also focuses on “senior” debt that is higher up in the pecking order and thus most likely to be repaid first if the borrower hits a snag. Wells Fargo just reiterated its “overweight” rating a few months ago, thanks to its strong performance, and CMTG is actually in the green since Jan. 1 despite recent volatility elsewhere in the stock market. While commercial real estate admittedly took a hit during the COVID-19 pandemic, CMTG remains comfortably profitable and is a good long-term investment.
- Digital Realty Trust Inc. (DLR): Dividend yield: 3.7%
- DLR is a unique tech-focused REIT with a specialty in providing space to house high-tech data centers. After all, while it’s all the rage for businesses to offload their servers to the “cloud,” the bottom line is that the hardware still must be housed somewhere – and Digital Realty is one of the leading companies that provides that physical server space. Through more than 290 high-performance data centers worldwide, it serves about 4,300 customers, including some of the top firms in the world. While DLR has admittedly seen a bit of trouble in 2022 thanks to broader headwinds for the tech sector, it offers double the dividends of the S&P 500 at present and could be a great long-term play as the megatrend of cloud storage is not going away anytime soon.
- Rayonier Inc. (RYN): Dividend yield: 3.0%
- In an era of record-breaking inflation, why not buy a REIT that is as much of a commodity producer as it is a real estate company? If that combo sounds impossible, then take some time to look at Rayonier. It’s a leading timberland owner that is structured as a real estate investment trust. Rayonier owns or leases nearly 3 million acres of timberlands in the U.S. South and Pacific Northwest as well as in New Zealand. This makes it incredibly unique in the sector because it’s not buying hospitals or office space, but rather massive tracts of forest land. In addition to commodity price inflation pushing up the value of its timber, the underlying value of Rayonier’s land is also a great hedge against economic downturns, as there are no rent checks to negotiate with tenants. The REIT has declined by about 9% this year as of Aug. 4, beating the S&P handily so far, and it delivers an above-average dividend to investors.
- Sabra Health Care REIT Inc. (SBRA): Dividend yield: 7.8%
- Sabra operates almost 450 specialty health care sites, skilled nursing centers and senior housing facilities with more than 40,000 beds. Health care expenses are generally very reliable and recession-proof, and as a result SBRA has managed to put up a roughly 19% gain this year as of Aug. 4, even as the rest of Wall Street has struggled. It’s looking good going forward, too, with its most recent quarterly results beating expectations on funds from operations – the key metric of cash flow most REIT investors watch. Its 30-cent quarterly dividend also adds up to a tremendous yield that is currently about four times that of the broader S&P 500 index.
- Stag Industrial Inc. (STAG): Dividend yield: 4.4%
- Stag Industrial is a roughly $6 billion REIT focused on industrial facilities that mainly include logistics companies and manufacturers as tenants. There’s risk for this kind of business if we see consumers and businesses pull back amid a rough economic environment, but Stag’s structure is such that a lot of the pain in such instances can be mitigated. Specifically, the company commonly rents entire buildings to single tenants for exclusive use, and does so under very long-term leases. Furthermore, it operates almost 400 different properties with 72.5 million square feet and has a nicely diversified portfolio, so it won’t take a huge hit if a handful of big companies change course. Besides, if you’re looking to play industrial real estate instead of residential or commercial operations, Stag is one of the few ways to do so at scale.
- Ventas Inc. (VTR): Dividend yield: 3.5%
- Ventas is a $20 billion health care REIT that has a roughly flat return so far this year, thanks to its reliable operations. Specifically, VTR provides space to doctors’ offices, medical research facilities and institutions such as hospitals or senior living communities. It has a massive portfolio of more than 1,200 properties that allows it to tap into one of the most reliable trends out there – the constant demand for care as people get old or sick. In late 2021, VTR closed on its acquisition of New Senior Investment Group Inc., a $2.3 billion elder care powerhouse, and that will only increase its dominant footprint going forward. The reliable cash from Ventas tenants helps fuel a generous 45-cent quarterly dividend that is likely to grow going forward, regardless of the macroeconomic picture.
- Vici Properties Inc. (VICI): Dividend yield: 4.2%
- Vici bills itself as “an experiential real estate investment trust,” which is a fancy way of saying that its properties are resorts and entertainment facilities. Most notably, Vici operates the world-renowned Caesars Palace on the Las Vegas Strip. All told, its portfolio includes 43 gaming facilities, about 58,700 hotel rooms, four championship golf courses and more than 450 restaurants, bars, nightclubs and sportsbooks, many under the Caesars name as well as Hard Rock Cafe. There is certainly risk here, due to the potential of an economic downturn amid shaky consumer spending stemming from high inflation. However, there has been durable demand for vacations in the wake of the COVID-19 lockdowns of prior years, and Vici has bounced back big. In fact, it is one of the few investments that have delivered more than 10% gains this year as of Aug. 4, even as stocks in a host of other sectors are underwater.
- Vornado Realty Trust (VNO): Dividend yield: 7.3%
- Though it has suffered some declines over the last year or so, $5.7 billion office REIT Vornado could hold big long-term upside now that the dust is starting to settle from the initial disruptions of the “work from home” craze. For starters, Vornado’s real estate portfolio is focused on top-tier markets including New York City, Chicago and San Francisco, so it has a bit more stability than office parks in less notable regions. It also has a very modern portfolio of properties, managing more than 23 million square feet of LEED-certified buildings. Some of its properties have received various awards for their “green” format. Vornado has been publicly traded for 60 years, has a rich history of returning cash to its investors across markets both good and bad, and has a low-carbon approach to offices that should serve it well for many years to come.
- Welltower Inc. (WELL): Dividend yield: 3.0%
Welltower is yet another health care REIT worth watching. At $37 billion in market capitalization, it is among the largest medical real estate companies in the space. And with a single-digit decline as of Aug. 4, it’s holding up much better than many other investments in 2022. Like the previously mentioned Sabra, Welltower is focused on senior housing operators, and it also targets hospital systems and clinics. It is a bit more international in flavor, with operations in Canada and the U.K. as well as in the U.S. The yield is admittedly a bit smaller than some of the other REITs on this list, but it is more stable thanks to its scale and diversification and could be a nice low-risk REIT to consider if you’re looking for a defensive play in 2022.