My Favorite Real Estate Investment Trust (REIT) Stocks

Introduction

Real Estate Investment Trusts, or REITs, are one of my favorite sectors to invest in.  I am not interested in owning rental home properties and do not have the resources to buy a commercial building.  REITs allow me to get exposure to real estate and the cash flow they produce without having to buy an actual property.  Here are my favorite REITs.

REITs also allow investors to diversify their investments and have historically provided a better return long term than the S&P 500 Index, as shown in the chart below.

I have been investing in REITs for a very long time and have many in my portfolio, but here are my top five favorite REITs investments, and one runner up.

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My Favorite REITs

Getty Realty Corp (GTY)

Getty is in the CAR business – CONVENIENCE AUTOMOTIVE RETAIL.  They don’t manufacture cars, they provide the support infrastructure that cars need.  As shown on their website, GTY is “a publicly traded, net lease REIT specializing in the acquisition, financing and development of convenience, automotive and other single tenant retail real estate. As of September 30, 2022, the Company’s portfolio included 1,021 properties in 38 states across the United States plus Washington, D.C.”

The company focuses on free-standing buildings, primarily on corner locations, in high traffic locations, and their properties range from 3,000-5,000 sq. ft.  Some of their tenants include: 7-Eleven, BP, Jiffy Lube, and AutoZone.

The current dividend yield is 4.77% and has a 7.43% 5-year dividend CAGR and has grown the dividend for 7 years.

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Agree Realty Corp (ADC)

Agree is a “Net lease growth REIT focused on the acquisition and development of high-quality retail properties” that was founded in 1971 and owns properties occupied by a who’s who of top retailers as tenants, as shown in the visual below. 

This diverse sector and tenant base provide stable earnings and consistency throughout market cycles. Per the company website, ADC focuses on four core principles: omni-channel critical, recession-resistant, avoidance of private equity sponsorship, and strong real estate fundamentals and fungible buildings.

ADC pays a monthly dividend equal to $2.88 a year, with a current yield of approximately 3.88% and has grown the dividend for 10 years with a 5-year CAGR of 6.83%.

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CubeSmart (CUBE)

CUBE is an owner and administrator of over 1200 self-storage locations in 39 states.  The company caters to individuals and businesses’ short and long term storage needs.  They have  a focus on markets with a higher population density, with approximately 22% of their location in the greater New York City area, per the company website.   They have robust technology-focused customer experience and renters can do everything online or through their phone app.  The company states that approximately 30% of new tenants sign up using the app.  

CUBE pays $1.96 per share a year, with a current dividend yield of approximately 4.38% and has grown the dividend for 12 years with a 5-year CAGR of 9.91%.  The company just raised the dividend 14% in December 2022.

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VICI Properties (VICI)

VICI is a newer company, started in 2017, rising from the bankruptcy of Caesars Entertainment.  They are the de facto owner of the Las Vegas Strip.  The company owns the largest concentration of properties on the Strip, as well as experiential locations throughout the United States and Canada.

They own the property for the Caesars Palace Las Vegas, MGM Grand, the Venetian Resort Las Vegas, Mandalay Bay, Harrah’s Las Vegas, the Mirage as well as many other locations.  Additionally they own four championship golf courses and 34 acres of undeveloped and underdeveloped land adjacent to the Las Vegas Strip.

According to their website, the company owns properties that hold approximately 59,300 hotel rooms and more than 450 restaurants, bars, nightclubs and sportsbooks.

Outside of gambling locations, they are expanding into non-gaming experiential locations including Great Wolf Resorts, Cabot, Canyon Ranch and Chelsea Piers.

During the Covid lockdowns, they still received 100% of their contracted rent and 96% of leases have CPI-linked escalation clauses to increase rents over the long-term

VICI currently pays $1.56 a year with a dividend yield of 4.60% and has raised the dividend for 4 years.  The 3-year CAGR is 8.63%.

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Realty Income (O)

Realty Income, or The Monthly Dividend Company, is a net lease owner of almost 12,000 standalone properties.  Notably per their website, the company has declared 631 consecutive common stock monthly dividends throughout its 54-year operating history and increased the dividend 118 times since Realty Income’s public listing in 1994.  They are a Dividend Aristocrat, with 26 annual dividend increases.  This dividend is supported by 1,100 tenants currently occupying 98.9% of their properties.  These tenants are in many different industries, as shown below, and include Dollar General, Walgreens, 7-Eleven, BJs Wholesale, Home Depot, Walmart, and Tractor Supply, among many others.  The company moved into the gaming industry with its purchase of the Encore Boston Harbor Resort & Casino Property last year and also recently invested internationally with grocery stores in the United Kingdom. 

The company currently pays monthly at an annual amount of $2.98 for a current yield of 4.40%.  The dividend CAGR is 3.80% and is raised multiple times per year.  One of the company’s strategic focuses is “To continue treating the dividend as sacrosanct to our mission”.  As a dividend growth investor, the continued focus on dividend is paramount to our investment thesis and it is great to see the company being dedicated to its owners.

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Runner Up:

Apple Hospitality REIT (APLE)

APLE owns hotel properties throughout the United States and is concentrated on a portfolio of Marriott, Hilton, and Hyatt-branded hotels. Apple Hospitality’s portfolio consists of 220 hotels with approximately 29,000 guest rooms located in 87 markets throughout 37 states. The company focuses on business and leisure travelers with upscale, room-focused hotels.

APLE is a runner-up solely because they had trouble during the Covid lockdown, with travel coming to a standstill, their operating profits disappeared and they had to suspend the dividend.  The company reinstated the dividend in April 2021 and raised it three times since then, to a monthly amount of $0.08 a share, equal to $0.96 a year, for a yield of 4.37%.  The payout is still below the $0.10 a month/share from before the pandemic but the current payout ratio is only 55% which provides opportunity to increase more going forward, especially with the continued return of business and personal travel.   The pandemic and total travel shutdown was a once in a lifetime event and I do not blame them for having to cut the dividend during this time. We should not have to encounter such an event again and I have stayed at locations owned by APLE and have had a great experience.

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Conclusion

REITs can provide a great return and income for investors while diversifying your stock holdings. There are many real estate industries to invest in, each with their benefits and risk profiles. Proper research and understanding of the risks is needed before any investment. These are my favorite REITs. What are your favorites?