Contributor, Benzinga
Updated: June 2, 2022

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Looking for the best REITs to buy this month? Keep reading to see our top picks for June for the best high-dividend REITs, best value REITs and the REITs with the greatest momentum.

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Real estate investment trusts, or REITs, offer an excellent opportunity to invest in real estate assets without the large capital requirements or management headaches. Finding the best REIT stocks to buy involves looking at the strength of each company's financials as well as its real estate portfolio. We've done the heavy lifting to narrow down your options for what REITs to buy this month.

Best REITs for High Dividends

For the best high-dividend REITs we looked at REITs with a high dividend yield compared to their peers with a healthy payout ratio and a history of dividend growth. These REITs aren't only paying an attractive dividend now, but are also likely to continue increasing dividends over time.  

1. Omega Healthcare Investors, Inc (NYSE: OHI)

Omega Healthcare Investors is a healthcare REIT that owns a portfolio of skilled nursing facilities and senior housing properties. The company has been dealing with some rent collection issues as a result of the COVID-19 pandemic, which has caused its share price to struggle in recent months. However, the long-term outlook remains positive, even if that means eventually replacing certain tenants.

If you're a dividend investor, it's hard to pass up the current 9.4% dividend yield. It is worth mentioning, however, that the company currently has a pretty high FFO payout ratio at 97.6%, but it has historically done well managing a high payout ratio and analysts expect an FFO per share increase over the next 12 months.

2. Alpine Income Property Trust, Inc (NYSE: PINE)

Alpine Income Property Trust is a diversified REIT with a portfolio of 128 single-tenant net leased commercial properties throughout the United States.

The REIT's most recent quarterly dividend was $0.27 per share and the stock has a 5.75% dividend yield. The FFO payout ratio of 57.8% provides this REIT's dividend with a significant safety margin.

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

W.P. Carey is another diversified REIT with a portfolio spanning the United States, Europe and other countries. The REIT's portfolio is mostly made up of industrial, warehouse and office properties, although it also includes retail, self-storage and others. The company currently owns 1,336 properties with an annual rent base of more than $1.2 billion.

W.P. Carey's most recent quarterly dividend payment was $1.06 per share and the stock's dividend yield currently sits at 5.19%.

Best Value REITs

For the best value REITs, we looked at REITs that are priced at a lower price to FFO multiple compared to their peers while also showing increases in revenue and earnings.

1. VICI Properties (NYSE: VICI)

VICI Properties is a gaming REIT that owns the real estate leased to some of the largest casinos in the U.S. The company recently acquired its closest competitor, MGM Growth Properties as well as The Venetian Las Vegas.

The REIT has been growing faster than the market has been able to keep up and will likely settle into a higher valuation multiple in the next couple of years.

Estimates project the company will grow its FFO per share by an average of 14% over the next 5 years. The REIT also has an attractive dividend yield of 4.94%.

2. Medical Properties Trust (NYSE: MPW)

Medical Properties Trust is a health care REIT that’s one of the largest owners of hospitals in the world. The company’s FFO per share has grown at an annual rate of 5.4% over the past 5 years, with an estimated 13.65% growth over the next year. The company has been growing faster than the market has noticed, leaving it attractively priced at a price to FFO multiple of 11.64x compared to the health care sector average of 13.5x.

3. Uniti Group (NYSE: UNIT)

Uniti Group is an infrastructure REIT with a vast network of fiber optic cables spanning the United States. While placing Uniti on a "Best REITs" list is seen as a controversial decision by many, the company's shares have an incredibly low price compared to the fair value and the bear case for this REIT seems to be greatly overexaggerated.

The nature of Uniti Group's business likely won't allow for any significant revenue or FFO growth in the near future, but it is likely that the market will start having a more favorable view on the company as it continues to prove its resilience. The infrastructure REIT sector has an average price to FFO multiple of 21.49x while Uniti Group is still price at a multiple of 8.85x.

commercial real estate office building

Since its inception, this real estate investment trust (REIT) has paid out quarterly dividends with an average annualized yield of 9.3%...

REITs With The Most Momentum

These REITs are showing the highest price increase over the 100-day simple moving average (SMA). This is a constantly changing list, so be sure to bookmark this page and check back often.

While momentum shouldn't be the only method for choosing REITs to invest in, it's a good indication that these companies are gaining strong investor trust.

TickerCompany±%PriceInvest

Hotel REITs have been some of the hardest hit from the pandemic, and CorePoint Lodging is no exception. The REIT owns a portfolio of 157 hotels, with over 21,000 rooms, located primarily in or near employment centers, airports and major travel thoroughfares.

The REIT's share price was already working on a downward trend leading up to the pandemic but has since been making consistent gains. The company's stock is up 144% over the past 12 months with additional upside left if the hotel industry continues its recovery.

Recent REIT Analyst Ratings

Best Performing REIT Sectors

These were the best performing REIT sectors based on total returns for the full year 2021.

SectorNumber of REITsYTD Total Return2021 Total ReturnsAvg. Dividend Yield
Self Storage5-7.92%79.43%2.68%
Industrial13-8.41%62.03%2.16%
Residential22-9.38%58.29%2.52%
Retail3-10.13%51.91%4.35%
Specialty9-2.13%41.69%4.83%
Infrastructure4-13.81%34.41%2.4%
Diversified13-7.25%29.25%4.81%
Timber43.51%28.82%2%
Data Centers3-14.28%25.47%2.35%
Office19-8.04%21%3.68%
Hotel159.07%18.22%0.55%
Health Care16-3.24%16.32%4.27%
FTSE Nareit Mortgage REITs33-13.8315.64%10.61%

Best Non-Traded and Private REITs

You may find that a private REIT offers greater price stability and higher returns. These REITs can't be bought and sold on the stock market like the publicly-traded REITs discussed above. Instead, shares of private REITs must be bought through an alternative investment platform, like crowdfunding, and shares typically have to be held for a minimum of 3 to 5 years.

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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. 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.

Real REITs: Weekly Newsletter

Benzinga’s research team has identified several undervalued REITs with major upside and an average dividend yield of over 6%. Be the first to get access to our new REIT data with exclusive insights and trade alerts.

Related content: BEST HIGH-YIELD REITS

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