Best REITs to Buy in April

March continued a recent trend where about 50% of all real estate investment trusts (REITs) produced positive gains while the other half languished with negative results. As has been the case in recent months, every inflation report and Fed speech was scrutinized by Wall Street for clues to the future direction of interest rates. In this uncertain environment, REIT investors should look for the highest quality issues in the sector.

The following list of REITs contains three distinct categories (Best High Yield, Best Growth and Best Value), while using long and short performance timeframes, providing what could be the best opportunities in the REIT sector moving into April 2024.

When it comes to choosing REITs, investors cannot just chase high-yielding dividends without considering the overall recent performance, safety and reliability of the dividend and the company.

Newlake Capital Partners Inc. (OTCMKTS: NLCP) replaces Easterly Government Properties Inc. (NYSE: DEA) as one of the best high-yield REITs to buy.. Here are some recent positive developments that have helped boost the share price.

On March 11, Newlake announced excellent Q4 operating results. Funds from operations (FFO) of $0.51 beat the estimates of $0.45 as well as its FFO of $0.48 in Q4 2022. Revenue of $13.02 million beat the estimates of $11.41 million and topped Q4 2022 revenue of $12.18 million.

On March 11, Newlake Capital Partners raised its quarterly dividend from $0.40 per share to $0.41 per share. The $1.64 annualized dividend yields 8.55%.

On March 14, Compass Point analyst Merrill Ross upgraded Newlake from Neutral to Buy and announced an $18.25 price target.

On April 2, the Florida Supreme Court approved an initiative to legalize recreational marijuana in Florida through a referendum on the November ballot. Newlake has one property leased to Curaleaf Holdings in Florida and will stand to benefit if the referendum is passed. Several of  Newlake’s tenants have a presence in Florida as well. It would not be surprising to see Newlake begin to acquire further properties in Florida, since polls have shown support for recreational use legalization in that state.

Newlake’s total return was 20.87% for March 2024, the second highest among all REITs. Investors may want to consider dollar cost averaging into a position or waiting for a pullback as its most recent price of $19.18 appears overbought among various technical indicators. Another thing to keep in mind is that as an OTC stock, the average daily volume is only 30,679 shares, which means the price can be volatile.

Outfront Media Inc. (NYSE: OUT) replaced Brightspire Capital Inc. (NYSE: BRSP) this month as one of the best high-yield REITs to purchase in April.

Outfront is a New York-based specialized REIT with 500,000 advertising displays across the largest U.S. markets, using billboard, digital, transit and mobile assets to showcase its clients. Outfront Media’s website claims that its media reaches 70% of all Americans on a weekly basis.

On February 21, Outfront Media reported its Q4 operating results. Adjusted funds from operations (AFFO) of $0.40 beat the estimate of $0.36 and revenue of $501.20 million beat the estimate of $495.89 million and topped the Q4 2022 revenue of $494.70 million.

Another positive for Outfront Media in March was its announcement that it will be expanding its programmatic capabilities in transit advertising across the New York City subway stations and commuter rail stations with a potential to reach over four million daily rider trips.

Outfront pays a quarterly dividend of $0.30 per share. The $1.20 annualized dividend presently yields 7.30%.

Outfront’s total gain of 18.93% was the fourth-best among REITs in March and is now at price levels not reached since early 2023.

EPR Properties (NYSE: EPR) is a Kansas City, Missouri-based diversified experiential REIT that owns and operates 289 properties, including movie theater chains, amusement parks, ski resorts, fitness centers and other recreational venues with 200 tenants across 44 states. It also owns 61 early childhood education centers and 9 private schools. At the end of 2023, it had a 99% occupancy rate.

EPR has also had positive news lately. On February 28, EPR reported its Q4 operating results. FFO of $1.18 per share beat the estimate of $1.16 per share and revenue of $171.98 million beat the estimate of $150.41 million by 14.34%. FFO was off by 5.6% and revenue by 3.76% from the Q4 earnings of 2022.

Also on February 28, EPR announced an increase in its monthly dividend from $0.275 to $0.285 per share. The annual dividend of $3.30 per share now yields 8.19%.

On March 25, Truist Securities analyst Michael Lewis maintained a Hold rating on EPR but lowered the price target from $51 to $46. Its most recent closing price was $41.82.

EPR Properties’ total return in March was 4.03%. It’s been meandering in a range between $40.36 and $42.87 since February but should it break out of that range, the next resistance level is not until $45. The high monthly dividend yields over 8%, making it a great fit for income investors.

Best Growth REITs

When looking for the best growth REIT stocks to purchase, investors can feel confident about making the best selections by considering the long-term price history of the company, regardless of where that price is today. These three REITs have a terrific history of appreciation but have lower dividend yields than other REITs.

Terreno Realty Corp. (NYSE: TRNO) replaces Equinix Inc. (NASDAQ: EQIX) this month as one of the best growth REITs to purchase, as Equinix has become embroiled in an ongoing investigation as to alleged potential violations of federal securities laws.

Terreno is an industrial REIT that owns and operates 259 properties with 16.0 million square feet in six major coastal U.S. markets. Those areas are Miami, Northern New Jersey/New York City, Washington D.C., Seattle, Los Angeles and San Francisco. Terreno has 580 customers as of Dec.31, 2023.

On February 7, Terreno released its Q4 operating results. FFO of $0.58 beat the estimates of $0.57 and topped Q4 2022 FFO of $0.54. Revenue of $86.48 million beat the estimates of $84.38 million and was 13.8% higher than Q4 2022 revenue of $76.01 million.

On April 1, Terreno Realty announced it has sold a 25,000-square-foot property in Seattle, Washington, for $11.0 million that Terreno originally purchased in 2016 for $4.7 million.

On April 2, Mizuho analyst Vikram Malhotra maintained a Neutral rating on Terreno but raised the price target 19.2% from $52 to $62.

Over the past five years, Terreno Realty has never cut the dividend and has increased the quarterly dividend five times from $0.24 per share to $0.27, $0.29, $0.34, $0.40 and in September 2023 to $0.45 per share. The annualized dividend of $1.80 presently yields 2.80%.

Terreno has a superior long-term growth record, with a five-year total return of 68.76% and a 10-year total return of 295.09%.  

Iron Mountain Inc. (NYSE: IRM) is a Portsmouth, New Hampshire-based specialty REIT with a focus on information management and storage, data center infrastructure and asset lifecycle management. Iron Mountain was founded in 1951 and has more than 225,000 customers worldwide. In recent years, it has shifted its focus from paper storage to data storage. 

Analysts have recently been positive on Iron Mountain. On March 15, Wells Fargo analyst Eric Luebchow maintained an Overweight position on Iron Mountain and raised the price target from $80 to $90. Barclays’ analyst Brendan Lewis also has an Overweight position from early March on Iron Mountain, with a $91 price target.

On February 22, Iron Mountain reported its Q4 operating results. FFO of $0.83 per share beat the consensus estimate of $0.81 per share and its FFO of $0.74 in Q4 2022. Revenue of $1.42 billion beat the Q4 2022 revenue of $1.28 billion but could not meet the analyst estimates of $1.45 billion.

After a superb February in which Iron Mountain was one of the best-performing REITs with a total return of 16.47%, this long-term excellent performer managed to add another 2.82% of total return in March. Its five-year total return is 157.33%, and its 10-year total return is 301.18%.

As a result of the positive earnings report, the P/FFO declined in March from 24.46 to 22.00. But despite the recent run-up, historically very few have matched Iron Mountain’s long-term total return of 3,666.03% since February 1996. 

American Tower Corp. (NYSE: AMT) is a Boston, Massachusetts-based specialty REIT that calls itself “a global leader in wireless infrastructure.” Founded in 1995, American Tower owns, operates and develops wireless and broadcast communications real estate. Most of its business is leasing space on wireless and broadcast towers and it also leases portions of the land below the tower for equipment storage. Typical tower components are coaxial cabling and fiber optic cables.

American Tower has a presence in 224,000 global communication sites across 25 different countries in six continents. About 43,000 of those properties are in the U.S. and Canada, and approximately 181,000 are international properties. 

On Feb. 1, long-time CEO/President Tom Bartlett retired from his positions and was replaced in those positions by Steven Vondran, who was the acting Executive VP and Global COO since November. Bartlett remains as an adviser to the new CEO.

On Feb. 27, American Tower reported its Q4 operating results. AFFO of $2.29 per share missed the consensus estimate of $2.32 and was below Q4 2022 AFFO of $2.34. But revenue of $2.79 billion was ahead of the consensus estimate of $2.74 billion and slightly above Q4 2022 revenue of $2.71 billion.

Many analysts are bullish on American Tower. On March 5, Barclays analyst Brendan Lynch maintained an Overweight position on American Tower and raised the price target from $224 to $234.

American Tower had a total return of -0.64% in March, adding to what has been a difficult first quarter, with a total return of -9.70%. But American Tower had been a leading growth REIT for many years with five- and 10-year total returns of 12.16% and 182.99%. It remains one of the top growth REITs to buy.

Best Value REITs

Long-term investors looking for undervalued REITs should consider solid companies with good track records over the years who for one reason or another have fallen out of favor with Wall Street. These REITs provide solid dividend yields for income investors, have low P/FFO ratios and over time may provide solid appreciation once economic conditions improve.

Independence Realty Trust Inc. (NYSE: IRT) is a Philadelphia-based residential REIT that at the end of 2023 had 106 multi-family properties with 31,829 units across 12 states. About 70% of the portfolio is in the Sunbelt region. Its investment strategy is focused on purchasing properties near major employment centers, with good school districts and higher-class retail stores. Independence Realty had a Q1 2024 same-store average occupancy rate of 94.3%.

The P/FFO ratio is 13.74, well below the P/FFO of peers such as AvalonBay Communities, Inc. (NYSE: AVB) with 16.66 and Mid-America Apartment Communities Inc. (NYSE: MAA) with 14.43.

Independence pays a quarterly dividend of $0.16 per share, and the annual dividend of $0.64 per share presently yields 4.18%. However, it should be noted that the dividend was cut from $0.18 to $0.12 in July 2020 because of COVID-19 before being raised to $0.14 in June 2022 and $0.16 in June 2023.

On March 4, Independence Realty announced it had received an investment grade rating of “BBB” from Fitch Ratings. Independence paid off $84.5 million of debt on its line of credit in January after closing on the sale of four properties for $200.70 million. 

Analysts are upbeat on Independence Realty. On March 6, JMP Securities analyst Aaron Hecht maintained a Market Outperform rating on Independence and raised the price target from $15 to $17. On March 12, Baird analyst Wesley Golladay maintained an Outperform rating on Independence Realty and raised the price target from $16 to $17.

On April 2, Independence Realty announced the closing of the sale of three properties in three markets for $168.1 million. The sale was part of 9 of 10 targeted properties for sale since October 2023. Independence has now repaid $488.9 million in debt from these sales. 

Independence Realty had a total return of 6.90% in March and has been on an upward trend since the end of October.

Realty Income Corp. (NYSE: O) is a San Diego-based, triple-net lease REIT, with over 15,450 properties around the world. The “Monthly Dividend Company”, as it’s widely known, is a member of the S&P 500 and an S&P 500 Dividend Aristocrat. Realty Income has increased its dividend 124 times since its IPO in 1994.   

On February 20, Realty Income reported its Q4 earnings. AFFO of $1.01 per share missed the estimate of $1.04 per share and was below AFFO of $1.05 per share in Q4 2022, but revenue of $1.08 billion beat the estimate of $1.02 billion and was 21.08% above revenue of $888.65 million in Q4 2022.

In addition, full-year 2024 AFFO guidance of $4.13-$4.21 per share fell short of the street’s expectation of $4.27 per share.

There were a few positives in March. On March 7, Mizuho analyst Vikram Malhotra maintained a Buy rating on Realty Income and lowered the price target from $60 to $56. It was recently trading at $53.47.

Also, on March 13, Realty Income raised its monthly dividend from $0.2565 per share to $0.2570 per share. 

After a lackluster February, Realty Income’s total return in March was a much improved 4.81%. Realty Income remains one of the foremost REITs and with good reason. Its total return since Jan. 3, 1995, is 1,192.37%. With a P/FFO of only 12.66 and a history of trading above $70 as recently as 2022, this very popular REIT remains an excellent value play.

Park Hotels & Resorts Inc. (NYSE: PK) is a Tyson, Virginia-based hotel REIT with 43 hotels and resorts with over 26,000 rooms, located in prime U.S. markets from Hawaii to Massachusetts, with high barriers to entry. Park Hotels is a Small cap stock with a market cap of $3.64 billion. Its most recent total occupancy rate in January 2024 was 65.0%. Q4 2023 occupancy was 71%, up from 69.5% in Q4 2022. 

Park was established as an independent company in January 2017, following its spin-off from Hilton. In September 2019, Park acquired Chesapeake Lodging Trust to add premium-brand hotels and resorts in prime markets such as Miami, Boston, Los Angeles and San Francisco.

On February 27, Park Hotels reported its Q4 operating results. AFFO of $0.52 per share beat the estimate of $0.49 per share and was 15.56% above the AFFO in Q4 2022 of $0.45 per share. Revenue of $657.00 million was ahead of the consensus estimate of $648.88 million, although below revenue of Q4 2022 of $665.00 million.

Park Hotels also said it expects full-year 2024 AFFO in a range between $2.02-$2.22 per share. The midpoint of $2.12 was two cents above the consensus estimate.

On March 1, Barclays analyst Anthony Powell maintained an Overweight rating on Park Hotels and raised the price target from $19 to $21.

Although Park Hotels was the fourth best-performing REIT in 2023 with a gain of 53.95%, at a recent close of $17.59, it’s still well below its pre-COVID and 2021 highs near $23.20. Its total return in March was 6.87%. With its recent earnings report and favorable analyst rating, it could certainly approach those highs again in 2024.

Recent REIT Analysis

REIT Sector Performance

You can learn quite a bit from how the sector performs as a whole, reflecting on figures collected by Benzinga.

What to Look for When Choosing The Best REITs

While publicly-traded REITs are bought and sold on the stock market like any other publicly-traded company, REITs are a unique asset class that needs to be analyzed differently than other stocks. 

Funds From Operations (FFO)

If you're familiar with stocks, you're most likely familiar with terms like earnings per share (EPS) and price-to-earnings ratio (p/e ratio). However, these metrics don't offer much help when looking at an equity REIT.

To understand a REIT's true cash flow, you have to look at their funds from operation (FFO). Since real estate is a depreciable asset, a REIT's reported net income includes a significant depreciation expense. It also includes capital gains and losses from the sale of properties, which don't represent what investors can expect the company to earn on a consistent basis.

FFO adds depreciation back into the REIT's net income and takes out any gains or losses on the sale of property, providing a more accurate picture of a REIT's true earnings.

To use FFO as a way to value REITs, we divide the REIT's current share price by its FFO per share to get a price to FFO ratio. We then compare the price to FFO of the different REITs in each real estate sector to find value opportunities.

Balance Sheet

REITs have to carry a lot of debt in order to finance the properties they purchase. This is especially true because REITs are required to pay out 90% of their taxable income to shareholders in the form of dividends. This doesn't leave REITs with the ability to stockpile a lot of cash.

It's important to make sure that the REIT you're investing in isn't carrying too much debt, though. The easiest way to do this is by looking at their total debt compared to their earnings before interest, tax, depreciation and amortization (EBITDA). This is called a debt to EBITDA ratio.

For instance, if a REIT has a total of $1 billion in debt and their annual EBITDA is $250 million, you would divide $1 billion by $250 million to get a debt to EBITDA ratio of 4.

Ideally, you want to look for REITs with a debt to EBITDA ratio somewhere between 4 and 6. Anything above 6 and their balance sheet starts to look risky. You also want to make sure that they're not too conservative with their debt. A debt to EBITDA ratio below 4 can indicate that they're using too much cash that could be going to investors instead of utilizing debt.

A solid REIT management team will use a reasonable amount of debt to maximize their overall returns. This means more growth and higher dividends being paid to investors.

Dividends

One of the greatest advantages to REITs is their dividends. On average, REITs pay out significantly higher dividends than most other dividend stocks. 

You want to be careful not to get caught in a yield trap, though. Some REITs may increase their dividend payments to an amount they can’t sustain in order to attract or keep shareholders. They also may put off cutting dividends when their FFO has dropped. In either case, buying a REIT with a dividend it can’t sustain is a quick way to lose money. 

To get an idea as to whether a REIT’s dividend is safe, you’ll want to look at the FFO payout ratio. This compares the company’s FFO per share to its dividend rate. 

For instance, if a REIT has an FFO per share of $2 and a dividend payment of $1.50 per share, you’ll simply divide the dividend rate by the FFO per share to get 75%. 

Ideally, the REIT’s FFO payout ratio will be somewhere between 70% - 80%. However, a lower payout ratio is fine if you’re happy with the yield. A slightly higher payout ratio isn’t necessarily a red flag as long as they’ve consistently maintained that payout ratio while either keeping or increasing their dividend payments over time. 

The Real Estate

You can’t forget that investing in a REIT is essentially investing in a real estate portfolio. If you were buying properties directly instead of investing in a REIT, you would want to invest in assets that would provide you the greatest potential return with the least amount of risk possible. You want to look at REITs the same way. 

If you’re looking for a dependable REIT, you’ll want to look at ones that invest in a property type with a strong outlook. For instance, if you think shopping malls are doomed you won’t want to invest in a REIT that owns a lot of shopping malls. 

REIT ETFs

A REIT ETF is an exchange-traded fund that invests in REITs and other real estate stocks. These funds typically follow a REIT index and have a diversified portfolio with investments spread out across multiple companies.

Investing in The Best REITs

A REIT’s recent financials provide a great basis for choosing the best ones to buy, but major changes can happen between quarterly filings. Before investing in a real estate stock, be sure to look for recent news about any acquisitions, dispositions, offerings, or any other relevant news that can affect their future performance.

Other intriguing REITs include the Plymouth Industrial REIT, Emirates REIT, U.S. REIT ETF and the Apple Hospitality REIT.

You can learn more about how to use REITs to invest in the real estate market with our guide on How to Invest in REITs.

Related content: BEST HIGH-YIELD REITS