The current environment of falling interest rates presents an opportune time to consider investing in REITs. As borrowing costs decline, REITs can take advantage of more favorable financing terms to expand their portfolios, acquire new properties, and refinance existing debt.
Also, as interest rates fall, bond prices increase, and their yield decreases. I expect that once the yields fall far enough, investors will flock to REIT stocks to buy in search of income. They may be pleasantly surprised with what they will find. This increased investor demand can drive up the prices of REIT shares, potentially generating capital appreciation for investors.
So, here are three REIT stocks to buy for investors looking to take advantage of this shift. These stocks are in the prime position for delivering strong returns for investors. Don’t miss out on these names.
EPR Properties (EPR)
EPR Properties (NYSE:EPR) operates in the experiential sector, owning venues like movie theaters, amusement parks, and ski resorts. They operate across 44 states. It has a dividend yield of around 7.9% at the time of writing, along with a growth rate of 0.30%.
EPR reported a net income of $148.9 million for 2023, slightly down from $152.1 million in 2022. Its earnings per share (EPS) for 2023 were $1.97, decreasing from $2.03 in 2022. However, the company experienced an increase in adjusted funds from operations (FFO) per diluted share. It rose to $5.22 in 2023 from $4.89 in 2022.
I also think there’s room for some significant capital appreciation for EPR stock. This is because it’s down 47.37% over the past five years. It’s important to note that its fundamentals have improved over this time. Furthermore, it could be undervalued in comparison to these long-term averages. This makes it one of those REIT stocks to buy.
Extra Space Storage (EXR)
Extra Space Storage (NYSE:EXR) is a leading self-storage REIT with a strong balance sheet, appealing for both income and growth. It has a dividend yield of 4.3% and a dividend growth rate of 5.88%. While EPR appeals for those seeking income, EXR is more for those with a longer time horizon, where compounding returns can significantly boost one’s overall efficiency of their returns. This is easily a top REIT stock.
For 2024, EXR has provided an outlook with core FFO per share expected to be in the range of $7.85 to $8.15. It should be noted that this came in under analyst forecasts for the short-term, according to Zacks. However, if investors are planning on holding companies like EXR for the long-term this could be only a minor consideration.
What I like about EXR is that its EPS is projected to increase steadily over the years with minimal volatility. Gaining from 5.03 in 2024 to 6.85 in 6.85. These kinds of steady returns work great for people slowly building their wealth over time, consistent with the dividend growth strategy, making it a buy for that specific investment approach.
Healthcare Realty (HR)
Healthcare Realty (NYSE:HR) specializes in healthcare facilities, showing recent occupancy gains and debt reduction. The company pays a dividend yield of 8.78% but has a negative dividend growth rate of 9.09%.
The issue with some kinds of REITs is that they operate in cyclical industries, which can expose one’s portfolio to volatility. With HR having high-value tenants that stay for the long haul, this may smooth out any shocks in the market and provide some much-valued visibility for income investors.
For 2024, HR forecasts a range of FFO per share between $1.52 and $1.58. While its EPS has struggled, and is expected to continue to struggle, there is a clear path forward according to analysts for it to return to breakeven.
Furthermore, buying shares now while the stock is near its 5-year low means one can lock in a superior yield on cost for the future, greatly improving the efficiency of the investment. This REIT stock is worth your money.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.