12 Best Real Estate Stocks to Buy Now

In this article, we discuss the 12 best real estate stocks to buy now.

Real estate stocks are known for insulating an investment portfolio against rising inflation. Inflation grew by 8.2% YoY during September 2022 in the US, surpassing a four-decade high recorded earlier in the year. Although the US Federal Reserve has increased benchmark interest rates five times in 2022, the increase in inflation is showing minimal signs of slowing down and coming close to the Fed’s target of 2%. During such times, the best real estate stocks offer safe long-term investment opportunities to shareholders with attractive dividend yields. Furthermore, these real estate companies lease out the properties owned by them and enjoy the benefit of a regular increase in rent. The rent increase is usually indexed against the consumer price index (CPI), which aids these companies in growing their income in line with the inflation levels.

A majority of the best real estate stocks are structured as real estate investment trusts (REITs). REITs are entities that generate 75% of their income from the assets under their ownership which can be either real estate, cash, or US treasuries. Furthermore, they are required to give back at least 90% of their taxable income as dividends to shareholders. According to Nareit, all types of REITs in the US collectively own $4.5 trillion worth of gross assets, and publicly listed REITs own two-thirds of these assets. The market capitalization of all the publicly listed REITs in the US stands at $1.4 trillion as of Q3 2022, with 30 entities included in the S&P 500 Index. Some of the leading real estate companies in the market include American Tower Corporation (NYSE:AMT), Equinix, Inc. (NASDAQ:EQIX), and Simon Property Group, Inc. (NYSE:SPG).

Our Methodology

We have discussed the financial performance and growth prospects of these companies. The analyst ratings have also been discussed to gauge the overall market sentiment on these stocks. Most of these companies offer secure shareholder returns through attractive dividend yields. Insider Monkey’s database of 895 hedge funds has been used to rank these stocks as of Q2 2022.

12 Best Real Estate Stocks to Buy Now

12. W. P. Carey Inc. (NYSE:WPC)

Number of Hedge Fund Holders: 17

W.P. Carey Inc. (NYSE:WPC) is a New York-based REIT founded in 1973. The company has 1,390 net lease properties in its portfolio with a total covered area of 170 million square feet. W. P. Carey Inc. (NYSE:WPC) operates in industrial, warehousing, office, retail, and self-storage properties.

In a research note issued on October 24, Mitch Germain at JMP Securities gave W. P. Carey Inc. (NYSE:WPC) stock a target price of $86, along with an Outperform rating. The analyst believes that Q3 2022 was “transformative” for the organization following the merger with Corporate Property Associates 18. The analyst also noted that W. P. Carey Inc. (NYSE:WPC) had made a significant effort in lowering its exposure to rising interest rates as it has been able to fix the financing cost for the majority of its debt.

In Q2, W. P. Carey Inc. (NYSE:WPC) reported FFO per share of $1.31, up $0.04 from the corresponding quarter last year. At 99.1%, the company’s portfolio occupancy rose to its highest level since 2017. Furthermore, W. P. Carey Inc. (NYSE:WPC) stock offers an attractive forward dividend yield of 5.97% as of October 28. The company has been raising its annual dividend for the last ten years. With a healthy balance sheet and $2.1 billion in liquidity at the end of the second quarter, analysts think W. P. Carey Inc. (NYSE:WPC) is in a good position to take advantage of growth opportunities.

11. Realty Income Corporation (NYSE:O)

Number of Hedge Fund Holders: 19

Realty Income Corporation (NYSE:O) is a California-based REIT with over 11,400 commercial properties in its portfolio. The company has leased out these properties on long-term contracts to more than 1,100 different clients belonging to 72 different industries.

Realty Income Corporation (NYSE:O) is a member of the distinguished Dividend Aristocrats List and is known for paying out dividends monthly. The stock offers an annual forward dividend yield of 4.87% as of October 28. Realty Income Corporation (NYSE:O) is considered one of the best real estate stocks by investors that are looking for a constant income stream.

RJ Milligan at Raymond James reiterated an Outperform rating on Realty Income Corporation (NYSE:O) stock with a target price of $68 in a research note issued on October 4. The analyst thinks that the stock is an attractive risk and reward play within the net lease industry despite the economic uncertainty. Realty Income Corporation (NYSE:O) has invested around $5 billion since the start of 2022 in acquiring new properties or expanding its current properties.

As of Q2 2022, Realty Income Corporation (NYSE:O) was held by 19 hedge funds.

10. Welltower Inc. (NYSE:WELL)

Number of Hedge Fund Holders: 26

Welltower Inc. (NYSE:WELL) is a Toledo, Ohio-based REIT focused on providing healthcare infrastructure that comprises seniors’ housing, post-acute care centers, and outpatient medical facilities.

On October 21, Steve Valiquette at Barclays gave Welltower Inc. (NYSE:WELL) stock a target price of $78 and maintained an Overweight rating. The analyst anticipates a slight improvement on a sequential basis in the healthcare services segment during Q3 2022, boosting demand for Welltower Inc.’s (NYSE:WELL) offerings.

Welltower Inc. (NYSE:WELL) has an annual forward dividend yield of 4.04% as of October 28. Analysts think Welltower Inc. (NYSE:WELL) is well-positioned to deal with higher interest rates in comparison to more leveraged REITs since it has a BBB+ rated balance sheet and a relatively low long-term debt-to-capital ratio. The company also has a substantial amount of retained capital to finance expansionary plans.

AEW Capital Management raised its stake in Welltower Inc. (NYSE:WELL) by 38% during Q3 2022.

9. STAG Industrial, Inc. (NYSE:STAG)

Number of Hedge Fund Holders: 27

STAG Industrial, Inc. (NYSE:STAG) is a Boston, Massachusetts-based REIT that works on acquiring and operating industrial properties across the US. The company owns 111.5 million square feet of properties across 40 states.

Blaine Heck at Wells Fargo gave STAG Industrial, Inc. (NYSE:STAG) stock an Overweight rating with a target price of $36 on October 18. The analyst thinks that the industrial REITs are in a strong position to counter the uncertain economic environment. The commentary by STAG Industrial, Inc.’s (NYSE:STAG) management revealed that on-the-ground activity remained stable for the company during Q3 2022. STAG Industrial, Inc. (NYSE:STAG) also shared that it did not face any material damage from the recent Hurricane Ian to its asset portfolio.

STAG Industrial, Inc. (NYSE:STAG) boasts a tenant retention rate of 90% and an occupancy rate of 98% as of Q3 2022. Furthermore, STAG Industrial, Inc. (NYSE:STAG) offers an attractive dividend yield of 4.77% as of October 28. The company has consistently raised its dividends since 2011.

8. Public Storage (NYSE:PSA)

Number of Hedge Fund Holders: 33

Public Storage (NYSE:PSA) is a Glendale, California-based REIT focused on self-storage spaces and units across the US and Europe since 1972.

Experts believe that Public Storage (NYSE:PSA) is an attractive play in an inflationary and recessionary environment due to its strong balance sheet. The company pays an annual dividend of $8 per share, translating into a forward dividend yield of 2.69% as of October 28. Public Storage’s (NYSE:PSA) net debt and preferred equity ratio stands at 4.0x EBITDA, reflecting that it’s well-positioned to pay higher dividends.

In terms of total return and volatility-adjusted returns since 2000, Public Storage (NYSE:PSA) has outperformed the S&P 500 with a return of 16.9% and a standard deviation of 21.2%. The company is one of the best real estate stocks with strong opportunities for external growth.

7. Equity Residential (NYSE:EQR)

Number of Hedge Fund Holders: 34

Equity Residential (NYSE:EQR) is a Chicago, Illinois-based REIT invested in 310 properties that comprise over 80,000 apartments. The company buys, sells, develops, and leases residential properties located in urban areas.

Experts see occupancy rates at a record level for Equity Residential (NYSE:EQR). The company has high exposure to growing residential markets and also has the power to increase rents faster during a high inflation period. Equity Residential (NYSE:EQR) offers an annual forward dividend yield of 4.02% as of October 28. Given its capacity to minimize expenses and primarily fixed-rate debt, analysts anticipate Equity Residential’s (NYSE:EQR)  funds from operations (FFO) per share to rise by 6-9% over the coming years. As a result, there is a chance to accelerate dividend growth and generate low double-digit total returns over the subsequent three years.

Baron Funds discussed its bullish outlook on Equity Residential (NYSE:EQR) in its Q2 2022 investor letter. Here’s what the firm said:

“The Fund’s multi-family REITs–Equity Residential (NYSE:EQR) has been generating strong occupancy, rent, and cash flow growth. We expect in-place rents, which remain below market rents, to be a source of ongoing strong cash flow growth in the near term. Equity Residentialis the largest U.S. apartment REIT and maintains a strong and liquid balance sheet. The company is currently valued at a 25% discount to net asset value and a 5.2% capitalization rate.”

6. SBA Communications Corporation (NASDAQ:SBAC)

Number of Hedge Fund Holders: 36

SBA Communications Corporation (NASDAQ:SBAC) is a Florida-based REIT founded in 1989. The company is an operator of wireless infrastructure across the US and leases sites to multiple cellular service operators.

On October 20, Brendan Lynch at Barclays gave SBA Communications Corporation (NASDAQ:SBAC) stock a target price of $280 and maintained an Overweight rating. Over the past six years, SBA Communications Corporation (NASDAQ:SBAC) has experienced consistent growth in cash flows from site leasing. The company is also one of UBS’ top conviction stock picks for 2022. The investment management firm thinks that SBA Communications Corporation (NASDAQ:SBAC) is in an optimal position for the future 5G investment cycle because it is the only pure-play public tower provider. SBA Communications Corporation (NASDAQ:SBAC) has an annual forward dividend yield of 1.05% as of October 28.

Baron Funds shared its positive outlook on SBA Communications Corporation (NASDAQ:SBAC) in its Q2 2022 investor letter. Here’s what the firm said:

“During the second quarter, we took advantage of the broader market dislocation and indiscriminate selling to increase the Fund’s exposure to wireless tower REITs at what we believe were attractive valuation levels. In June, we re-initiated a position in fellow tower operator, SBA Communications Corp. 

We are optimistic on the long-term prospects for wireless cell towers for the following reasons.

• Secular Growth Drivers:

Mobile Data Growth: The average smartphone user in the U.S. consumed approximately 3.5 megabytes (“MB”) of data per month in 2016. Today, that same user consumes 20 to 25 MB per month with the proliferation of data intensive applications such as video streaming and gaming. Within five years, industry estimates expect this number to be over 50 MB per month. With the addition of connected smart devices, overall mobile data growth is expected to grow 25% per year over the next five years…” (Click here to see the full text)

Besides SBA Communications Corporation (NASDAQ:SBAC), investors are also bullish on stocks like American Tower Corporation (NYSE:AMT), Equinix, Inc. (NASDAQ:EQIX), and Simon Property Group, Inc. (NYSE:SPG).

5. Equinix, Inc. (NASDAQ:EQIX)

Number of Hedge Fund Holders: 38

Equinix, Inc. (NASDAQ:EQIX) is a California-based digital infrastructure company that was founded in 1998. It is a leading data center REIT globally.

On October 12, Matthew Niknam at Deutsche Bank gave Equinix, Inc. (NASDAQ:EQIX) stock a target price of $635, along with a Buy rating. The analyst noted that the data center stocks are weighed down by increasing power costs and recession-related fears. However, experts believe that the top-line trends of Equinix, Inc. (NASDAQ:EQIX) are strong due to its superior brand power along with premium positioning in the industry. Equinix, Inc. (NASDAQ:EQIX) has a multi-region presence and the conversion towards a REIT has provided the corporation with a sustainable, tax-efficient structure for the long run. The stock’s forward annual dividend yield stands at 2.18% as of October 28.

Baron Funds shared its outlook on Equinix, Inc. (NASDAQ:EQIX) in its Q2 2022 investor letter. Here’s what the firm said:

“Equinix, Inc. is a network dense global data operator of over 240 data centers in 69 metros and 30 countries. Its customers place high value on the ecosystem of customers that Equinix has curated within its data centers over many years so that they are able to interconnect within the data center facility instead of having data travel through the public internet (latency sensitive applications as well as data security considerations). Customers value the global network with 90% of customers in multiple metropolitan areas and 75% in multiple geographic regions.

Equinix has a diverse but valuable customer base with no single customer greater than 2.6% of recurring monthly revenues. COVID-19 has accelerated digital transformation priorities for many organizations, and we believe that Equinix will be poised to benefit from: i) organic growth through new bookings and pricing power (the majority of incremental bookings are from existing customers); ii) growth of high margin cross-connect revenue (approximately 20% of total); and iii) continued geographic expansion through development and select M&A. We believe the combination of these factors will allow the company to grow annual cash flow in the high singledigit range.”

4. Simon Property Group, Inc. (NYSE:SPG)

Number of Hedge Fund Holders: 45

Simon Property Group, Inc. (NYSE:SPG) is an Indianapolis, Indiana-based REIT that owns, operates, and leases shopping malls and community and lifestyle centers.

Craig Mailman at Citi opened a “30-day positive Catalyst Watch” on Simon Property Group, Inc. (NYSE:SPG) before its Q3 2022 earnings. The Street anticipates the company to report revenue and FFO per share of $1.27 billion and $1.54, respectively. Mailman thinks that Simon Property Group, Inc.’s (NYSE:SPG) valuation can attract generalist investors as it is trading at a discount compared to its historical levels and the broader REIT sector. The analyst also thinks that Simon Property Group, Inc.’s (NYSE:SPG) forward dividend yield of 6.9% as of October 28 is well-covered.

Baron Funds shared its stance on Simon Property Group, Inc. (NYSE:SPG) in its Q1 2022 investor letter. Here’s what the firm said:

“Following a share price gain of more than 97% in 2021, we recently trimmed the Fund’s holdings in Simon Property Group, Inc. (NYSE:SPG), the largest and premier mall operator in the U.S. Though we are also tempered by the expectation for modest earnings growth in 2022, we remain optimistic about the company’s long-term prospects. Simon owns A-quality malls in A-quality geographic locations. We expect Simon to benefit from the ongoing economic recovery and believe management is well positioned to acquire real estate assets given its strong balance sheet and low cost of capital.”

3. Crown Castle Inc. (NYSE:CCI)

Number of Hedge Fund Holders: 48

Crown Castle Inc. (NYSE:CCI) is a Houston, Texas-based REIT that provides shared communications infrastructure. The company has over 40,000 cell phone towers and offers 85,000 miles of fiber optics services.

Crown Castle Inc. (NYSE:CCI) stock offers an attractive forward dividend yield of over 5% as of October 28. In a research note issued on October 21, Gregory Williams at Cowen gave Crown Castle Inc. (NYSE:CCI) stock an Outperform rating along with a target price of $149. The analyst noted that the company reported strong Q3 2022 results. Crown Castle Inc. (NYSE:CCI) generated revenue and adjusted FFO per share of $1.75 billion and $1.85, respectively, which outperformed consensus forecasts of $1.74 billion and $1.83.

Furthermore, Crown Castle Inc. (NYSE:CCI) observed its top line rise by 8% YoY, while tower leasing rose by 6% YoY. The company expects to achieve the target of 4% organic revenue growth during the next year, making it one of the best real estate stocks to invest in right now.

Here’s what ClearBridge Investment said about Crown Castle Inc. (NYSE:CCI) in its Q1 2022 investor letter:

“U.S. communications company Crown Castle International (NYSE:CCI) was the largest detractor from quarterly performance. Crown Castle is the leading independent owner and operator of wireless communications infrastructure in the U.S. with a portfolio of approximately 40,000 towers. The stock underperformed as, driven by rising interest rates, investors rotated away from defensive into more value-oriented sectors. Communications infrastructure remains attractive, however, as companies continue to deploy greater capital spend to support the strong tailwinds from 5G.”

2. Prologis, Inc. (NYSE:PLD)

Number of Hedge Fund Holders: 49

Prologis, Inc. (NYSE:PLD) is a San Francisco, California-based REIT that is focused on delivering logistics solutions by developing, and operating one of the biggest networks of logistics real estate in the world.

On October 24, Jeffrey Spector at Bank of America gave Prologis, Inc. (NYSE:PLD) stock a Buy rating and a target price of $140. The target price reflects a potential upside of over 35% from the closing price as of October 28. Spector noted that the company reported a strong outperformance on the core results for Q3 2022. The leasing spreads rose to 38.5% during Q3, and the analyst positively welcomed the increase in the company’s same-store net operating income (NOI) forecast.

The stock offers an annual forward dividend yield of 2.88% as of October 28. Analysts think Prologis, Inc. (NYSE:PLD) is one of the best real estate stocks as it has considerable pricing power, allowing it to maintain its growth levels and generate solid shareholder returns in the future.

Carillon Tower Advisers shared its stance on Prologis, Inc. (NYSE:PLD) in its Q2 2022 investor letter. Here’s what the firm said:

“Prologis, Inc. (NYSE:PLD) underperformed due to supply and demand concerns following the announcement that a major online retailer is slowing the rollout of new warehouses. However, we continue to believe that there is overwhelming demand for the company’s assets.”

1. American Tower Corporation (NYSE:AMT)

Number of Hedge Fund Holders: 52

American Tower Corporation (NYSE:AMT) is a Boston, Massachusetts-based REIT that owns, develops, and operates multi-tenant wireless and broadcast communications real estate. The company has a portfolio of nearly 222,000 communication sites. American Tower Corporation (NYSE:AMT) has secured the first position on our list of the 12 best real estate stocks to buy now.

Eric Luebchow at Wells Fargo gave American Tower Corporation (NYSE:AMT) stock a target price of $235 and reiterated an Overweight rating in an update issued to investors on October 18. The analyst suggests going long on American Tower Corporation (NYSE:AMT) stock despite some downward revision in estimates due to interest rate hikes and adverse foreign exchange impact.

On October 27, investment firm Stonepeak revealed its plans to invest a further $570 million in the US data center business of American Tower Corporation (NYSE:AMT). The firm had previously invested $2.5 billion in the company, reflecting its bullish long-term outlook on the stock. American Tower Corporation (NYSE:AMT) pays an annual dividend of $5.88, translating into a forward yield of 2.87% as of October 28.

Here’s what ClearBridge Investments said about American Tower Corporation (NYSE:AMT) in its Q2 2022 investor letter:

“The top contributor was our sole real estate holding American Tower (NYSE:AMT), the leading independent wireless tower operator with roughly 221,000 properties globally, including about 43,000 in the U.S., 76,000 in India and 23,000 in Brazil. The company’s business model is to lease space on its towers to predominantly wireless carriers on a long-term basis, generally ranging 5–10 years in duration, with built-in price escalators. This approach results in a stable and predictable cash flow business with high incremental margins — attractive qualities especially in volatile markets like the second quarters.”

You can also take a peek at the 15 Biggest Internet Companies in the World and the 15 Biggest Cell Phone Companies in the World.

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Disclose. None. 12 Best Real Estate Stocks To Buy Now is originally published on Insider Monkey.