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Real estate investment trusts (REITs) are publicly traded companies that allow individual investors to buy shares in real estate portfolios that receive income from a variety of properties. They allow investors to invest easily in the real estate sector, which includes companies that own, develop, and manage residential, commercial, and industrial properties.
Among other requirements, REITs are required to pay out at least 90% of their taxable income as dividends. A key REIT metric is funds from operations (FFO), a measure of earnings particular to the industry. Some big names within the sector include American Tower Corp., Crown Castle International Corp., and Prologis Inc.
The COVID-19 pandemic has significantly disrupted the commercial real estate industry, as workers around the world have adapted to working from home and various lockdown measures have been enacted. Despite the economy’s recovery, the industry’s recovery has been uneven. Some companies are moving to new commercial office locations, others are repurposing existing spaces, and others are redesigning their existing space. Spurred by interest rates hikes imposed by the Federal Reserve, some analysts predicted that the residential housing market may see a correction or even a crash.
REITs, as represented by an exchange-traded fund (ETF)—the Real Estate Select Sector SPDR Fund (XLRE)—have outperformed the broader market. XLRE’s -3.2% total return over the past 12 months bested the benchmark Russell 1000 index, which has provided a total return of -9.4%. These market performance numbers and the statistics in the tables below are as of June 24, 2022.
Here are the top three REITs with the best value, fastest growth, and most momentum.
These are the REITs with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you’re paying less for each dollar of profit generated.
| Best Value REITs | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing P/E Ratio | |
| Annaly Capital Management Inc. (NLY) | 6.33 | 9.2 | 3.5 |
| New Residential Investment Corp. (NRZ) | 9.82 | 4.6 | 4.1 |
| SL Green Realty Corp. (SLG) | 49.49 | 3.2 | 7.3 |
Source: YCharts
- Annaly Capital Management Inc.: Annaly Capital invests in real estate and related assets, including agency mortgage-backed securities (MBS), residential and commercial real estate, and middle-market lending. On June 8, Annaly announced a Q2 2022 common stock dividend of $0.22 per share. The dividend is payable July 29 to shareholders of record as of June 30, 2022.
- New Residential Investment Corp.: New Residential Investment is a public REIT investing in the residential housing sector. The company’s portfolio includes mortgage-servicing-related assets, residential loans, non-agency securities, and similar investments.
- SL Green Realty Corp.: SL Green Realty is a self-managed REIT which acquires, develops, manages, and operates commercial properties in the New York metropolitan area. As of March 2022, it held interests in 71 buildings totaling 34.7 million square feet. The company reported on June 6 that it would sell a vacant office condominium at 609 Fifth Avenue to an undisclosed domestic investor for a gross sale price of $100.5 million. The transaction is expected to close in June.
Fastest-Growing REITs
These are the top REITs as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.
| Fastest-Growing REITs | ||||
|---|---|---|---|---|
| Price ($) | Market Cap ($B) | EPS Growth (%) | Revenue Growth (%) | |
| Crown Castle International Corp. (CCI) | 174.99 | 75.8 | 646.2 | 17.3 |
| Vornado Realty Trust (VNO) | 29.88 | 5.5 | 600.0 | 16.4 |
| Realty Income Corp. (O) | 69.19 | 41.6 | 30.8 | 82.6 |
Source: YCharts
- Crown Castle International Corp.: Crown Castle International is a REIT that operates and leases communication infrastructure. Its assets include over 40,000 cell towers and more than 80,000 miles of fiber throughout the U.S.
- Vornado Realty Trust: Vornado Realty Trust is a REIT that owns, develops, and manages retail and office properties. The company’s portfolio includes over 26 million feet of property in New York City, San Francisco, and Chicago.
- Realty Income Corp.: Realty Income is a REIT that owns and manages commercial properties across the U.S. and Europe. The company seeks investments with the goal of delivering dependable monthly dividends. On June 14, Realty Income announced a common stock monthly cash dividend of $0.2475 per share. The dividend is payable July 15 to shareholders as of July 1, 2022.
These are the REITs that had the highest total return over the past 12 months.
| REITs With the Most Momentum | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | |
| American Campus Communities Inc. (ACC) | 64.47 | 9.0 | 37.4 |
| Duke Realty Corp. (DRE) | 57.45 | 21.3 | 18.1 |
| W.P. Carey Inc. (WPC) | 85.78 | 16.4 | 16.6 |
| Russell 1000 | N/A | N/A | -9.4 |
| Real Estate Select Sector SPDR Fund (XLRE) | N/A | N/A | -3.2 |
Source: YCharts
- American Campus Communities Inc.: American Campus Communities is a REIT that develops, manages, and owns student housing properties. Including third-party managed properties, American Campus Communities owns over 200 properties, the vast majority of which are student housing.
- Duke Realty Corp.: Duke Realty is a self-managed REIT which owns, manages, and develops industrial real estate. It also provides services related to construction management and development. On June 13, the company reported that it would be acquired by logistics real estate company Prologis Inc. (PLD) in an all-stock transaction worth roughly $26 billion. Prologis plans to retain 94% of Duke’s assets. The transaction is expected to close in Q4 2022.
- W.P. Carey Inc.: W.P. Carey is a diversified REIT which is internationally managed. It owns commercial real estate that it leases on a long-term basis, including industrial, warehouse, retail, self-storage, and office properties. The company reported Q1 2022 earnings results on April 29. Net income attributable to W.P. Carey more than tripled YOY as revenues climbed by 12.0%. Higher lease revenues related to acquisitions and rental increases as well as higher lease termination income helped to drive growth.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.
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