Best REITs to Buy in March in December 2024 • Benzinga (2024)

February was a mixed month for real estate investment trusts (REITs) with slightly more than half of all REITs showing positive gains while the rest were in negative territory. Every week seemed to bring an inflation report with a much different tone from the one before it.

As March begins, investors continue to monitor every nuance of the Federal Reserve’s thinking, hoping to hear some clues about when it may act on lowering interest rates. In this uncertain environment, REIT investors must 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 both long and short performance time frames and provides what could be the best opportunities in the REIT sector moving into March:

Best High-Yield REITs

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. Consider the following:

Easterly Government Properties Inc. (NYSE: DEA) is an office REIT that acquires, develops and manages Class A commercial properties and leases them solely to government agencies through the General Services Administration. Easterly Government Properties owns 90 properties with 8.9 million leased square feet across 26 states.

There is much to take notice of in Easterly’s news since the start of the year. Its occupancy rate is now at 100% with a weighted average lease term (WALT) of 10.5 years.

Co-Founder and former Chairman Darrel W. Crate became the new CEO on Jan. 1, 2024, replacing retiring CEO William C. Trimble III.

On Jan. 11, Easterly announced that it received an investment grade issuer credit from Kroll Bond Rating Agency of BBB with a stable outlook.

On Jan. 25, Easterly announced it has extended a $100 million unsecured term loan from 2016, which will now mature on Jan. 30, 2025.

On March 4, Easterly announced it’s been awarded a 20-year noncancelable lease with the U.S. government for a 50,777-rentable-square-foot federal courthouse in Flagstaff, Arizona.

There have been concerns among investors that office REITs would see diminishing tenant occupancy, but Easterly’s tenant base is stable and growing. With an annual $1.06 dividend that yields 8.87%, it remains a quality high-dividend buy for March.

Brightspire Capital Inc. (NYSE: BRSP) is an internally managed New York-based mortgage REIT (mREIT) that supplies floating rate capital to multifamily, office, hotel, retail and net-lease real estate investments, most often consisting of senior mortgage loans. Brightspire presently has 87 loans in its portfolio and about $4.4 billion in assets under management.

On Feb. 21, Brightspire reported excellent fourth-quarter earnings. Adjusted earnings per share (EPS) of $0.28 beat the estimate of $0.24 per share by 16.67%. Revenue of $30.21 million beat the estimate of $29.56 million. However, revenue was well below $58.97 million in the fourth quarter of 2022.

Brightspire’s total return in February was negative 3.36%. However, it’s improved its performance since the earnings announcement.

Brightspire pays a quarterly dividend of $0.20 per share and the annual dividend of $0.80 per share yields 11.51%. However, this is concerning because the dividend is well above the earnings per share of $0.43. The good news is the $0.28 EPS was a penny better than the year-ago same quarter and over 300% better than the $0.09 EPS in the third quarter of 2023. So Brightspire seems to be turning things around. The dividend was cut in 2019 from $0.15 per share to $0.10 per share but has doubled since then and has been stable for the past 21 months.

Although the dividend yield is lofty, more conservative income investors should note that Brightspire is a more speculative buy and a REIT that at times can be somewhat volatile.

EPR Properties (NYSE: EPR) replaces Global Medical REIT Inc. (NYSE: GMRE) as one of the best high-yield REITs to buy in March. Global Medical had a decline in revenue that also missed estimates and may be a laggard for a while.

EPR Properties is a Kansas City, Missouri-based diversified experiential REIT that owns and operates 359 locations, including movie theater chains, amusem*nt parks, ski resorts, fitness centers and other recreational venues with 200 tenants across 44 states. It also owns 71 early childhood education centers and nine private schools.

EPR has produced some positive news. On Feb. 28, fourth-quarter operating results were announced. Funds from operations (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 fourth-quarter earnings of 2022.

Also on Feb. 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%.

EPR Properties’ total return in February was negative 6.58%, but it’s bounced back since the earnings and dividend announcements. It should continue to do well in the upcoming weeks and the high monthly dividend yield makes it a great fit for income investors.

Best Growth REITs

When considering 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 appreciation history but have lower dividend yields than many other REITs.

Equinix Inc. (NASDAQ: EQIX) is a Redwood City, California-based specialized REIT that owns and operates a network of over 250 data centers across 71 major metropolitan areas, providing critical infrastructure to over 10,000 customers and 260 Fortune 500 companies across 32 countries. Founded in 1998, Equinix has 456,000 total interconnections.

February was another positive month for Equinix. On Feb. 7, it announced it’s expanding its presence in Australia by executing a power purchase agreement (PPA) to create long-term financial stability for companies that develop clean energy resources. A PPA is a financial contract in which Equinix agrees to purchase its energy from renewable generators at a fixed price with a multiyear term.

On Feb. 14, Equinix gave investors a Valentine’s Day present when it announced its fourth-quarter operating results. FFO of $5.54 per share beat the estimate of $5.30 per share and was 26.1% above FFO of $4.39 in the fourth quarter of 2022. Revenue of $2.11 billion was in line with estimates and a 12.81% increase from fourth-quarter 2022 revenue of $1.87 billion.

On Feb. 29, RBC Capital Markets analyst Jonathan Atkin maintained an Outperform rating on Equinix, while raising the price target from $855 to $950. However, on March 1, James Cramer said while he personally likes Equinix, he can’t recommend it because the stock has just gone up so much.

While Cramer is correct that Equinix has risen a great deal, it has shown no sign of topping out. Equinix had a February total return of 7.63%. It remains one of the best growth REITs with a five-year total return of 119.38% and 428.49% over the last 10 years.

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 been positive on Iron Mountain in 2024. On Jan. 23, Stifel analyst Shlomo Rosenbaum maintained a Buy rating on Iron Mountain and raised the price target from $65 to $76. One day later, Barclays analyst Brendan Lynch maintained an Overweight rating on Iron Mountain and raised the price target from $69 to $79.

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

Nevertheless, Iron Mountain was one of the best-performing REITs in February, with a total return of 16.47%.

The one cautionary note for investors is that Iron Mountain’s P/FFO is now 24.46, so the stock may be best purchased on a pullback. But despite the recent run-up, historically very few REITs have matched Iron Mountain’s long-term total return of 3,590.77% since February 1996.

American Tower Corp. (NYSE: AMT) is a Boston-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. 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 on six continents. About 42,000 of those properties are in the U.S. and Canada, and approximately 183,000 are international properties. Contracts usually have a term from five to 10 years with renewal options and annual lease escalators of approximately 3%.

Analysts are largely bullish on American Tower. On Jan. 24, Barclays analyst Brendan Lynch maintained American Tower with an Overweight rating but lowered the price target from $229 to $224.

On Feb. 1, long-time President and CEO Tom Bartlett retired from his positions and was replaced in those positions by Steven Vondran, who was the acting executive vice president and global chief operating officer since November. Bartlett remains as an adviser to the new CEO.

On Feb. 27, American Tower reported its fourth-quarter operating results. Adjusted FFO (AFFO) of $2.29 per share was below the consensus estimate of $2.32 and fourth-quarter 2022 AFFO of $2.34. But revenue of $2.79 billion was ahead of the consensus estimate of $2.74 billion and also slightly above fourth-quarter 2022 revenue of $2.71 billion.

On Feb. 28, JPMorgan Chase & Co. analyst Phillip Cusick maintained an Overweight position on American Tower, while lowering the price target from $236 to $230. On the same day, BMO Capital Markets analyst Ari Klein maintained an Outperform position on American Tower, while lowering the price target from $235 to $228.

After a loss of 10.58% in January, American Tower recovered to gain 1.64% in February. It’s been a leading growth REIT for many years with five and 10-year total returns of 26.29% and 189.52%, respectively.

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 now provide solid dividend yields for income investors, have low price/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 with 120 multifamily properties with 35,427 units across 13 states. About 70% of its properties are in the Sun Belt. Its investment strategy is focused on purchasing properties near major employment centers, with good school districts and higher-class retail stores. As of Feb. 12, 2024, Independence Realty had a same-store occupancy rate of 94.5%.

The price/FFO ratio of 13.49 is well below the P/FFO of peers such as AvalonBay Communities Inc. (NYSE: AVB) with 16.35, Mid-America Apartment Communities Inc. (NYSE: MAA) with 14.17 and Camden Property Trust (NYSE: CPT) with 14.15.

Independence pays a quarterly dividend of $0.16 per share and the annual dividend of $0.64 per share presently yields 4.15%. 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 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 $200.7 million.

Independence Realty had a total return of negative 0.34% in February. Its five-year total return is 69.14% and the 10-year total return is 142.45%.

Realty Income Corp. (NYSE: O) is a San Diego-based, triple-net lease REIT, with over 13,423 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 123 times since 1994. The occupancy rate for its portfolio is 98.6%.

However, its fourth-quarter earnings slipped a bit. AFFO of $1.01 per share missed the estimate of $1.04 per share and was below AFFO of $1.05 per share in the fourth quarter of 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 the fourth quarter of 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.

As a result, Realty Income’s total return in February was negative 3.25%. Nevertheless, Realty Income is one of the foremost REITs today, and with good reason. Its total return since Jan. 3, 1995, is 1,164.9%. However, after a rally that brought it up to $59.55, Realty Income has since fallen back to trade near $52. With a P/FFO of only 12.32 and a history of trading above $70 as recently as 2022, this popular REIT remains an excellent value play.

Park Hotels & Resorts Inc. (NYSE: PK) is a Tysons, 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 $3.63 billion. Its most recent total occupancy rate in the fourth quarter of 2023 was 71%, up from 69.5% in the fourth quarter of 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.

Park Hotels & Resorts replaced Four Corners Property Trust Inc. (NYSE: FCPT) this month as one of the best value REITs to buy in March. While Four Corners performed well in February, its P/FFO is 14.71 and its payout ratio is up to 82%. Four Corners’ upside may be limited from here, while Park Hotels had better numbers and outperformed Four Corners in February.

On Feb. 27, Park Hotels reported its fourth-quarter operating results. AFFO of $0.52 per share beat the estimate of $0.49 per share and was 15.56% above the AFFO in the fourth quarter of 2022 of $0.45 per share. Revenue of $657 million was ahead of the consensus estimate of $648.88 million, although below revenue of fourth-quarter 2022 of $665 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 2 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 $17.30, it’s still well below its pre-COVID and 2021 highs near $23.20. With its recent earnings report and favorable analyst rating, it could approach those highs again in 2024.

Recent REIT Analyst Ratings

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