Summary
- Diversified REITs offer an extraordinary mix of well-diversified rents from tenants in varied geographies.
- The Real Estate sector (XLRE) has been the worst-performing over the last year. Now may be the time to capitalize on beaten-down REITs with strong fundamentals to demonstrate resilience amid macro headwinds.
- REITs offer higher dividend income than common equities and can offer favorable tax structures.
- We have three Strong Buy-rated REITs with yields between 4%-8% based on Seeking Alpha’s Quant Rating system.
Investing in Real Estate Investment Trusts (REITs)
Anyone who has invested likely heard the saying “diversify your portfolio.” Exposure to more than one type of investment can be essential to combat inflation, generate income, and balance risk and reward – especially in a challenging economy.
But another element is to invest in high-quality, preferably undervalued companies with solid AFFO and FFO growth to deliver greater upside. And while real estate has been hit hard this last year, diversified REITs that offer a mix of residential and commercial assets in various industries have proven to be safe havens in the Real Estate market and have also outperformed on the right mix of value, growth, plus characteristics like momentum, profitability, and EPS revisions. Why purchase individual properties that require maintenance and can create headaches when you can own a specific theme of properties? Broad exposure to companies with +90% occupancy rates and stocks with solid yields and strong dividend safety – two investment characteristics that matter in an environment that eats away at portfolios. Whether or not you’re an income-oriented investor, I have three top diversified REITs that provide above-average yields and should be considered by investors seeking to invest in REITs.
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