Real estate investment trusts, or REITs, are companies that own income-producing property. They are attractive investments because they must distribute a minimum of 90% of their taxable profits as dividends to investors. Investing in REITs will make your portfolio more diverse. Each REIT has a different investment focus, ranging from office buildings and shopping malls to apartments and warehouses. Hence, you cannot afford to ignore REITs trading at a discount.
Investing in a REIT can help to mitigate some of the risks associated with investing in a single property. REITs are usually a more stable investment because they’re required to pay out most of the money they make through certain types of dividends. For these reasons, REITs can be attractive for investors looking for diversification and income.
It’s not difficult to get drawn in by the market right now and make a snap decision. However, we want you to consider REITs trading at a steep discount. While they are volatile investments in the short term, they do offer long-term value.
| EQIX | Equinix | $703.74 |
| AMT | American Tower Corporation | $271.39 |
| BXP | Boston Properties | $89.38 |
| DLR | Digital Realty | $131.21 |
| VTR | Ventas | $53.72 |
| PLD | Prologis | $132.01 |
| SUI | Sun Communities | $161.99 |
Equinix (EQIX)
Year-to-date performance: -17%
Equinix (NASDAQ:EQIX) is a great investment for anyone looking to pour capital into data centers. It operates data centers around the world and provides internet connectivity to businesses.
One major reason why Equinix is a great investment is that it has a strong financial position; additionally, the company has many long-term contracts with major customers, including Apple (NASDAQ:AAPL), Nokia (NYSE:NOK), Facebook, and Amazon (NASDAQ:AMZN).
Data centers are essential to modern living. They power the technological world, from cloud computing to artificial intelligence (or AI), and demand is only growing.
According to a recent Arizton Advisory and Intelligence report, the global data center market is expected to reach $288.3 billion by 2027, up from $215.8 billion in 2021. This represents a compound annual growth rate of 4.95%. The report cites many factors driving this impressive growth, including the explosion of digital content, the rise of cloud computing, and the continued expansion of the internet of things. With data center usage projected to continue its upward trajectory, it’s clear that this industry has strong long-term prospects.
Equinix has maintained stability and growth through a combination of factors, including its ability to provide reliable service at a competitive cost, its high-quality customer care, and its ability to innovate. For 2022, Equinix forecasts total revenues to range between $7.291 billion and $7.341 billion, a 10% to 11% increase over the previous year.
American Tower Corp. (AMT)
Year-to-date performance: -7%
American Tower Corporation (NYSE:AMT) is one of the leading cellular and internet service providers. Its been in the business for a long time and is now one of the largest tower companies in the world, with ~43,000 towers worldwide.
Large service providers like Verizon (NYSE:VZ), AT&T (NYSE:T), and T-Mobile (NASDAQ:TMUS) are American Tower customers. That is why it can secure five-to-10 year initial lease terms with its tenants with annual rent built in. In the past 10 years, American Tower has grown double-digit as new data centers keep popping up due to increased demand.
American Tower Corp. has a strong track record of delivering shareholder value, and its stock has outperformed the S&P 500 Index over the past five years. American Tower has one of the market’s most predictable and lucrative business models that pays dividends.
In addition, the company is strong financially and generates cash. This gives the company the ability to keep investing aggressively and grow through property purchases.
American Tower also provides investors with a 2.11% dividend yield, which compares nicely with the S&P 500 dividend yield of 1.69%. American Tower’s payout ratio of 68% is ideal for a company that needs to keep growing. It has plenty of cash left over from its profits so as not to miss out on any opportunities by investing them elsewhere, like acquiring new sites or developing existing ones more efficiently with modern technology.
Thus, American Tower Corp. is a great stock to buy and hold for long-term growth.
Boston Properties (BXP)
Year-to-date performance: -22%
Boston Properties (NYSE:BXP) is a real estate trust that owns, manages, and develops office, hotel, retail and residential properties. It is also one of the largest developers in the US, with a portfolio to match. Boston Properties has a portfolio of 52.5 million square feet.
The company has developed some of Boston’s iconic buildings, including the Prudential Center and the John Hancock Tower. The company is also a major player in Boston’s thriving biotech industry, with many properties in the Boston-Cambridge life sciences cluster. In addition to its work in Boston, BXP has also developed several prominent buildings in New York City, San Francisco, and Washington, D.C.
However, the stock has suffered tremendous damage in the last two years. This is because major metropolitan cities across the U.S. were forced to shut down. In addition to the broader work-from-home trend, Boston Properties also saw profits evaporating because of the exodus of people to the suburbs.
But city living is making a big comeback as demand and interest in city centers continue to grow. This has helped drive leasing activity for Boston Properties, which inked leases of 5.1 million square feet of office space last year — more than 1.4 million over the previous year.
Though Boston Properties is facing a few hurdles, it can still increase occupancy. Overall, BXP has a strong track record of creating value for shareholders. Boston Properties is an excellent long-term investment for investors seeking exposure to the Boston real estate market.
Digital Realty Trust (DLR)
Year-to-date performance: -26%
Digital Realty (NYSE:DLR) is a leading data center and colocation solutions provider. The company’s colocation solutions offer a convenient, cost-effective way to house server and networking equipment. Digital Realty offers services in 290 facilities across six continents.
Its portfolio provides customers with a global footprint that can support their growth and expansion. In addition to its data center and colocation solutions, Digital Realty offers a wide range of other services. These services include managed services, cloud hosting, and disaster recovery. Digital Realty’s comprehensive approach to data center solutions makes it an ideal partner for organizations of all sizes.
Its innovative platform enables companies to scale their businesses quickly and efficiently. The company’s portfolio of data centers is located in key markets worldwide, including North America, Europe, Asia-Pacific, and Latin America. Digital Realty’s data centers are purpose-built and designed to meet each customer’s specific needs.
The company’s doing well because the business plan to grow operations and improve customer service continues to be in effect. Per the mid-point of its guidance, Digital Realty expects revenue to increase 7.3% this year, with EBITDA margins expanding by 3.7%.
Additionally, the industry it operates in is also on the rise. The global data center industry is expected to see new business opportunities with the rising penetration rates for cloud computing and IoT technologies.
Ventas (VTR)
Year-to-date performance: 0.77%
Ventas (NYSE:VTR) is a REIT focusing on health care properties. It owns and leases a portfolio of hospitals, nursing homes, assisted living facilities, and other healthcare-related properties.
Ventas is one of the largest REITs in the United States and is a popular stock among income investors due to its high dividend yield of 3.35%.
The company has a long history of paying and increasing its dividend, making Ventas an attractive investment for income-seeking investors. Ventas also has a strong track record of growth, including robust mergers and acquisitions (M&A) activity. In recent years Ventas has acquired several large portfolios of healthcare properties, further solidifying its position as a leading REIT in the healthcare sector.
Plus, the senior housing industry has seen a major recovery. Occupancy rates are increasing nicely. In addition, the population of people ages 80+ is expected to grow faster than the overall generation over the next ten years. This should provide Ventas’ portfolio with favorable demographics for growth in this sector of our economy.
All in all, Ventas is a well-respected player in the healthcare real estate industry. It is a great option for investors seeking exposure to this sector.
Prologis (PLD)
Year-to-date performance: -23%
Prologis (NYSE:PLD) invests in logistics properties around the world. It offers warehouses, distribution centers, and other logistics facilities. Its portfolio is diverse, with around 1 billion square feet of gross leasable area in 19 countries across the Americas, Europe, and Asia.
The company leases its properties to more than 3,500 clients, including many of the world’s top 3PLs (third-party logistics providers), e-commerce companies, and transportation carriers. Prologis has a diversified portfolio of properties located in key global markets.
The REIT leases its properties to customers on a long-term basis. Prologis’ strategic focus is on creating value for shareholders by growing its portfolio through acquisitions, developing new properties, and maximizing the returns on its portfolio.
Despite the recent increase in cases of Covid-19, occupancy rates have been going up over the last few quarters. The portfolio is 98.1% leased as of March 31, a great achievement considering the strained macroeconomic environment.
Sun Communities (SUI)
Year-to-date performance: -23%
Sun Communities (NYSE:SUI) is a publicly traded REIT specializing in manufactured home communities. It owns and operates over 603 properties around the world. However, its main focus is the U.S.
Sun Communities was founded in 1975 and is headquartered in Southfield, Michigan. It pays a quarterly dividend of $0.88 per share. The annual yield is a very juicy 2.19%. Hence, Sun Communities is a popular investment for income investors due to its high dividend yield and stability of cash flows.
The home builder has a beta of 0.78, which means it is less volatile than the overall stock market and tends to outperform during economic downturn periods. Housing is becoming more expensive. And the supply of homes is shrinking. Hence, it is a great time for manufactured housing stocks as they continue their upward trajectory.
Total occupancy, including manufactured housing communities and recreational vehicle resorts, was 97.2% on June 30. Sun Communities reported core funds from operations (Core FFO) of $3.37 per share, representing an uptick of 9.4%. The manufactured home REIT has reported its earnings and raised its forecasted Core FFO guidance by 1-cent at the midpoint. The new per share range is $7.22-7.32.
Altogether, Sun Communities is a well-managed company with a proven track record of success. It is an attractive investment opportunity for those looking to diversify their portfolio or invest in the manufactured housing industry.
On the publication date, Faizan Farooque did not have (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.