High interest rates weighed on real estate investment trusts during 2022 and 2023, but REIT stocks have recovered thus far this year. Better yet, it’s not too late to capitalize on this trend, by accumulating positions in the top REITs to buy now.
Why? Although the prospect of interest rate cuts has helped the REIT sector embark on a comeback, as rates still have not started to come down, this comeback/recovery has been minimal.
However, starting later this year, when the U.S. Federal Reserve is expected to implement at least one interest rate cut, the REIT rebound could kick it into high gear.
As rate hike led to outsized losses for REIT stocks, rate cuts could do the opposite, driving big gains. Beyond their potential as a way to play lower interest rates, there are also several names in the space that stand out, because of REIT-specific catalysts.
Put it all together, and it’s easy to see why there is a big opportunity with the top REITs to buy now, such as the following seven real estate investment trusts listed below.
Federal Realty Investment Trust (FRT)
tiny house figures atop letter blocks spelling out REIT, representing reits to buy. stock predictions. best REITs
Source: Shutterstock
Federal Realty Investment Trust (NYSE:FRT) is a REIT specializing in the ownership of shopping centers and other high-end retail properties.
Across the U.S., particularly in affluent metro areas like D.C., Boston, Los Angeles, and the San Francisco Bay Area, FRT owns a total of 102 retail properties.
With this focus on quality and geographic diversification, it’s no surprise that FRT stock has built a track record of dividends and dividend growth.
With 56 years of consecutive dividend growth under its belt, Federal Realty is not just a “dividend aristocrat”; it’s a “dividend king” as well. At current prices, FRT has a forward dividend yield of 4.34%. Over the past five years, annual dividend growth has averaged just 1.39%.
However, if interests begin to move lower later this year, this could have a big impact on FRT’s valuation. Trading at a forward price to funds from operations of 14.9, sports a fair valuation today, but lower rates could drive a rerating for the REIT sector.
JBG Smith Properties (JBGS)
image of small toy homes with a red arrow pointing up to represent reits to buy
Source: Shutterstock
JBG Smith Properties (NYSE:JBGS) is another of the REITs to buy now based in the Washington, D.C. metro area, yet instead of retail properties, JBG Smith is considered an office REIT.
Yes, with a rebound in commercial office space demand stymied by the remote work trend, the “office real estate apocalypse” has and continues to be a thing.
Even so, with JBGS stock, investor pessimism about office REITs could benefit you. For starters, while considered an office REIT, a look at JBG Smith’s current portfolio says otherwise.
In particular, in the National Landing section of Arlington, Virginia, home to Amazon’s (NASDAQ:AMZN) HQ2. Besides possibly surging on rate cuts, this REIT could also rise in value, as the market appreciates its move from being office building-focused.
While you wait for price appreciation, you can collect a relatively high dividend yield of 6.92%.
Modiv Industrial (MDV)
REITs to buy Real estate investment trust REIT on an office desk.
Source: Vitalii Vodolazskyi / Shutterstock
Modiv Industrial (NYSE:MDV), a lesser-known REIT, but is nonetheless a potential rising star in the space.
As its corporate name suggests, Modiv is an industrial REIT, focused on the ownership of properties like manufacturing facilities.
In past coverage of MDV stock, I’ve pointed out multiple positives with this micro-cap REIT. For one, the fact that Modiv both has a high dividend yield, and is a monthly dividend stock.
Based on Modiv’s last declared monthly dividend of 9.58 cents per share, the REIT has a forward annual yield of around 7.84%. Not only that, Modiv is selective in the types of properties it acquires.
The REIT primarily focuses on buying industrial properties under triple-net leases, with long lease terms and steady annual base rental increases.
For instance, Modiv’s portfolio has a weighted average lease term of 14 years, with an average annual rental increase of 2.5%.
Put it all together, and Modiv may have the ingredients in place to generate strong returns, through dividends and price appreciation. In the more immediate future, rate cuts could drive a big increase in price for this high-yielding REIT.
Net Lease Office Properties (NLOP)
a wooden house shape holds 3 bags of cash representing reits to buy
Source: Shutterstock
The name of Net Lease Office Properties (NYSE:NLOP) is pretty self-explanatory, but rather than being an opportunity for investors to own a triple-net lease office portfolio, what makes NLOP one of the REITs to buy now is the upside potential from property divestitures.
Since being spun off from net-lease giant W.P. Carey (NYSE:WPC) last year, NLOP has been busy whittling down its portfolio. As Seeking Alpha commentator REITer’s Digest explained earlier this month, this REIT’s objective is to sell off its properties, pay down debt, and distribute the proceeds to shareholders.
Taking a look at NLOP’s balance sheet, the payoff could be substantial. According to its latest quarterly financials, NLOP has a book value of $43.78 per share, versus a $24.73 per share stock price.
That said, completing a full liquidation could prove easier said-than-done. Now is of course not an optimal time to be divesting of office properties.
However, if you are a fan of special situation investments, and believe that the discount priced into NLOP and other office REITs has become overdone, Net Lease Office Properties is an opportunity to consider.
Realty Income (O)
realty income logo highlighted by a magnifying glass on a web browser
Source: Shutterstock
Realty Income (NYSE:O) is regarded by REIT investors as a top-shelf name in the space.
Focused on the ownership of triple-net lease retail properties, Realty Income not only is known for paying monthly dividends. This REIT literally trademarked the phrase “the monthly dividend company.”
To top things off, besides paying monthly dividends, Realty Income frequently increases the size of its monthly distributions. Earlier this month, the REIT announced its 126th monthly dividend increase since 1994.
At current prices, O stock has a forward annual dividend yield of 5.94%. Over the past five years, O’s payouts have increased by an average of 3.55% annually.
While Realty Income has bounced back from its late 2023 lows, with interest rates staying “higher for longer,” O shares have been sitting tight in the low-$50s for several months.
However, if the Fed sticks to its plan to lower rates at least once later this year, and implements further rate cuts during 2025 and beyond, this could spark a rebound for this much-followed REIT. During a lower interest rate environment, O traded for prices north of $70 per share.
UMH Properties (UMH)
a person in a suit holds a tiny house to represent reits to buy
Source: Shutterstock
UMH Properties (NYSE:UNH) focuses on the ownership of manufactured home communities. Better known as mobile home parks, this is a lucrative, fast-growing area of the multifamily real estate market.
Largely, since it’s a lower-cost housing option, demand is rising. This means greater opportunity for organic growth via rent increases.
There are several manufactured housing REITs out there, but UMH stock may be the one to consider as one of the REITs to buy now. With a dividend yield of 5.54%, UMH beats peers on yield.
For instance, Equity Lifestyle Properties (NYSE:ELS) has a 2.89% forward yield. Another peer, Sun Communities (NYSE:SUI), has a forward yield of 3.24%.
In terms of valuation, using the price to funds from operations metric, which is the REIT version of price-to-earnings, UMH is also cheaper than both ELS and SUI.
This comes despite forecasts calling for UMH’s FFO to rise 10.75% next year, versus expected FFO growth of 6.2% for ELS, and 6.04% for SUI. With all of this in mind, UMH Properties may have the strongest rebound potential, in the event rate cuts lead to a broad rally for REIT stocks.
Vici Properties (VICI)
Person holding mobile phone with logo of American real estate company Vici Properties Inc. on screen in front of web page. VICI stock.
Source: T. Schneider / Shutterstock
Vici Properties (NYSE:VICI) is the biggest landlord on the Las Vegas Strip. This REIT owns the land and physical buildings that house many of the top casino resorts in Vegas.
Beyond “Sin City,” Vici’s portfolio extends to properties in other top U.S. regional gambling markets.
VICI stock currently has a forward dividend yield of 5.91%. Annual payouts have grown by an average of 7.62% over the past five years.
While you may at first be concerned that Vici’s fortunes depend heavily on the fortunes of its tenants, keep in mind that, boom times or recession, this house always wins.
In the near-term, rate cuts could drive a big rally for VICI. Long-term, other catalysts could come into play.
Built-in rental rate increases point to continued FFO growth, and hence, continued dividend growth. Also, as I have noted previously, Vici Properties is well-positioned to make further needle-moving acquisitions. Another strong opportunity for yield and price appreciation, consider VICI one of the REITs to buy now.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
