Here’s a hard lesson that many new investors have learned in 2022: Stocks don’t always go up. Year to date, the S&P 500 has tumbled 14%.
But you don’t necessarily need a rallying market to make money in stocks. You can always earn passive income through dividends. And owning real estate investment trusts is one of the best ways to do that.
REITs collect rent from their properties and pass it along to shareholders. That means investors don’t have to worry about screening tenants, fixing damages or chasing down late payments. They simply sit back and watch the dividend checks roll in.
The sector has caught Wall Street’s attention too. Here are three REITs that institutional investors find particularly attractive — even in today’s shaky market environment.
Boston Properties (BXP)
Boston Properties is the largest publicly traded developer, owner and manager of Class A office properties — high-quality buildings that command high rents — in the U.S.
The company has a portfolio of 201 properties totaling 52.8 million square feet. Boston Properties generates long-term recurring rental revenue as its portfolio has a weighted average remaining lease term of 7.8 years.
Management maintains a strong focus on gateway regions with long-term rent growth prospects. Its top three markets by net operating income are Boston (34%), New York (28%) and San Francisco (20%).
Paying quarterly dividends of 98 cents per share, the REIT currently offers an annual yield of 3.3%.
Last week, Mizuho analyst Vikram Malhotra upgraded Boston Properties from ‘neutral’ to ‘buy,’ naming the stock his top pick in the office REIT space. His price target of $135 is roughly 10% above current levels.
Warehouses may not seem like exciting pieces of property, but investors of Prologis aren’t complaining. The warehouse-focused REIT has delivered a total return — stock price appreciation plus dividends earned — of more than 200% over the past five years.
Logistics facilities like warehouses are critical to our economy, particularly as consumers have embraced online shopping.
Prologis is a leading player in the field. It has investments in 4,675 logistics facilities that total nearly 1 billion square feet. They are leased to 5,800 customers across two major categories: business-to-business and retail/online fulfillment.
The REIT’s top tenants include names like Amazon, FedEx, DHL and UPS — companies that are firmly entrenched during this era of e-commerce.
Prologis pays quarterly dividends of 79 cents per share, giving it an annual yield of 1.9%.
On Monday, Raymond James analyst William Crow reiterated a ‘strong buy’ rating on Prologis, noting the sector’s potential to deliver free cash flow and increasing dividends. He also raised his price target on the shares to $190 — around 14% above where the stock sits today.
Public Storage (PSA)
Public Storage is a leading player in the self-storage business. It owns more than 2,800 self-storage facilities in 39 states totaling 200 million rentable square feet.
The company has been around for 50 years, and it’s still growing. From 2010 to 2021, the REIT’s same-store net operating income increased by 80%.
The business has served income investors well, providing dividends every single quarter since 1981. Today, the REIT has a quarterly dividend rate of $2.00 per share, translating to an annual yield of just over 2%.
The stock has also picked up momentum, gaining about 45% over the past 12 months.
More returns could be on the horizon. JPMorgan analyst Michael Mueller recently raised his price target on Public Storage from $385 to $434 while maintaining an ‘overweight’ rating. With the stock trading just below $400 right now, Mueller’s target implies potential upside of almost 10%.
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