Real estate is always a solid addition to a diversified portfolio. It also is not as correlated to the stock market as other alternative type investments. The portfolio managers for the UBS U.S Select REIT portfolio continue to see a muted total return environment for REITs and commercial real estate over the next few years, as solid property level cash flow growth is offset by falling valuations due to rising interest rates. They continue to prefer REITs with a combination of low leverage, above-average net operating income (NOI) growth and value-added development capabilities. We screened their list of stocks to buy by sector and looked for the top dividend yields available.
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Alexandria Real Estate Equities Inc. (ARE) is the top name to buy in the office sector. The company has 159 properties, including 156 properties located in nine states in the United States and three properties located in Canada. The UBS price target for the stock is $77. The Thomson/First Call estimate is at $78. Investors are paid a 3.8% dividend. Remember, REIT dividends may contain return of principal.
UDR Inc. (UDR) is the top yielding stock to buy in the apartment sector. The company reported solid second-quarter earnings back in July. Total revenue during the quarter was $191.8 million, up 6.5% year-over-year and exceeding the consensus estimate of $189 million as well. UBS has a $27 price objective, and the consensus number is at $26. Shareholders are paid a 3.8% dividend.
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DDR Corp. (DDR) is the top name to buy in the shopping center sector. The company engages in acquiring, developing, redeveloping, owning, leasing and managing shopping centers, mini-malls and lifestyle centers. It reported second-quarter earnings in line with what Wall Street expected and up 8% from a year ago. The UBS price target for the stock is at $19, the same as the consensus target. Investors are paid a 3.2% dividend.
Simon Property Group Inc. (SPG) is the top regional mall stock to buy, and the 900-pound gorilla in the REIT world. Simon Property reported second-quarter funds from operations (FFO) per share of $2.11, beating the estimate by $0.04 per share. FFO per share jumped 11.6% over the prior year. The company also reported revenue of $1.24 billion, which was in line with expectations. UBS price target for this elite name is $192, while the consensus target is posted at $186.50. Shareholders are paid a 2.9% dividend.