What are the highest paying REITs?
While real estate has never been a big part of Buffett's investing strategy, Berkshire Hathaway has owned shares of STORE Capital, a REIT focused on single-tenant operational real estate.
| Company (ticker) | 5-year total return | 5-year dividend growth |
|---|---|---|
| Equinix (EQIX) | 125.0% | 9.5% |
| Prologis (PLD) | 121.8% | 12.4% |
| Eastgroup Properties (EGP) | 107.9% | 13.3% |
| Gaming and Leisure Properties (GLPI) | 99.7% | 1.1% |
| Symbol | Company | REIT performance (1-year total return) |
|---|---|---|
| AOMR | Angel Oak Mortgage Inc. | 60.92% |
| SKT | Tanger Outlets | 55.01% |
| MDV | Modiv Industrial Inc. | 44.80% |
| SEVN | Seven Hills Realty Trust | 41.52% |
- Schwab U.S. REIT ETF (SCHH)
- Real Estate Select Sector SPDR Fund (XLRE)
- iShares Core U.S. REIT ETF (USRT)
- iShares Mortgage Real Estate Capped ETF (REM)
- Invesco Active U.S. Real Estate Fund (PSR)
- Dimensional Global Real Estate ETF (DFGR)
- Fidelity MSCI Real Estate Index ETF (FREL)
While real estate has never been a big part of Buffett's investing strategy, Berkshire Hathaway has owned shares of STORE Capital, a REIT focused on single-tenant operational real estate.
| # | Name | C. |
|---|---|---|
| 1 | Prologis 1PLD | 🇺🇸 |
| 2 | American Tower 2AMT | 🇺🇸 |
| 3 | Equinix 3EQIX | 🇺🇸 |
| 4 | Simon Property Group 4SPG | 🇺🇸 |
Bottom line. Investors eyeing REITs may find a potential recovery ahead. With rate cuts on the horizon, many publicly traded REITs have rebounded, and the industry as a whole seems well-poised for a recovery in the coming year.
Risks of investing in REITs include higher dividend taxes, sensitivity to interest rates, and exposure to specific property trends.
REITs allow individual investors to make money on real estate without having to own or manage physical properties. Direct real estate offers more tax breaks than REIT investments, and gives investors more control over decision making.
“I recommend REITs within a managed portfolio,” Devine said, noting that most investors should limit their REIT exposure to between 2 percent and 5 percent of their overall portfolio. Here again, a financial professional can help you determine what percentage of your portfolio you should allocate toward REITs, if any.
Why not to invest in REITs?
Interest Rate Risk
The value of a REIT is based on the real estate market, so if interest rates increase and the demand for properties goes down as a result, it could lead to lower property values, negatively impacting the value of your investment.
As we dive into 2024, the Fed's accommodative approach to tackling inflation is likely to provide an impetus to the REIT sector, which depends highly on the debt market to carry out business activities. These companies benefit from lower borrowing costs. Moreover, low interest rates contribute to higher valuations.
For investors seeking a steady stream of monthly income, real estate investment trusts (REITs) that pay dividends on a monthly basis emerge as a compelling financial strategy. In this article, we unravel two REITs that pay monthly dividends and have yields up to 8%.
Prologis Inc, American Tower Corp, and Equinix INC were the real estate investment trusts (REITs) worldwide with the largest market caps as of March 2023.
Warren Buffet prefers to invest in REITs instead of real property because they are a great source of passive income, are reward-oriented, and are more liquid than property ownership.
- Apple (AAPL).
- Bank of America (BAC).
- American Express Co. (AXP).
- Coca-Cola Co. (KO).
- Chevron (CVX).
- Occidental Petroleum (OXY).
- Kraft Heinz (KHC).
- Moody's Corp. (MCO).
Federal Realty: The king
Federal Realty has increased its dividend annually for 54 consecutive years, which it claims (and there's no reason to doubt it) is the longest streak of any publicly traded real estate investment trust (REIT).
A REIT will be closely held if more than 50 percent of the value of its outstanding stock is owned directly or indirectly by or for five or fewer individuals at any point during the last half of the taxable year, (this is commonly referred to as the 5/50 test).
Data source: Nareit and YCharts (2022). As you can see, REITs have outperformed the S&P 500 over the past 20-, 25-, and 50-year periods. REITs also outperformed stocks in the most recent full year of available data (2021).
A lot of REIT investors focus too way much on the dividend yield. They think that a high dividend yield implies that a REIT is cheap and a good investment opportunity. In reality, it is often the opposite, and the dividend does not say much, if anything, about the valuation of a REIT.
Can REITs lose value?
Publicly traded REITs have the particular risk of losing value as interest rates rise, which typically sends investment capital into bonds.
- Digital Realty Trust (DLR) Source: dotshock / Shutterstock. ...
- Modiv Industrial (MDV) ...
- InnSuites Hospitality Trust (IHT) ...
- Iron Mountain (IRM) ...
- Acres Commercial Realty (ACR) ...
- Angel Oak Mortgage REIT (AOMR) ...
- Digital BridgeGroup (DBRG)
REITs historically perform well during and after recessions | Pensions & Investments.
Since most non-traded REITs are illiquid, there are often restrictions to redeeming and selling shares. While a REIT is still open to public investors, investors may be able to sell their shares back to the REIT. However, this sale usually comes at a discount; leaving only about 70% to 95% of the original value.
It's not necessarily a bad idea to own REITs in taxable brokerage accounts. But because of complex REIT taxation rules, they certainly make more sense in IRAs. This way, the REITs avoid taxation on the corporate level and you can defer or avoid taxes on the individual level, as well.
