4 Top REITs to Buy Before the New Year
The ongoing economic recovery has benefited real estate investment trusts (REITs) because the value of their underlying real estate assets has increased. And while the expected increase in interest rates...
The ongoing economic recovery has benefited real estate investment trusts (REITs) because the value of their underlying real estate assets has increased. And while the expected increase in interest rates could impact REITs’ performance due to their dependence on debt, viewing REITs as bond substitutes because of their high dividend payments should drive their performance. Therefore, we think it could be wise to scoop up the shares of quality REIT stocks Public Storage (PSA), Weyerhaeuser (WY), Regency Centers (REG), and Lamar Advertising (LAMR), before the new year. Read on.
REITs have been exhibiting impressive growth thanks to the continuing economic recovery, which is increasing the value of their underlying real estate assets. While their dependence on debt could be concerning because the Fed is expected to raise interest rates soon, most REITs’ balance sheets have become less leveraged this year. Also, their high dividend-paying nature allows many investors to view REITs as bond substitutes. So, the industry should keep performing well even in a high-interest-rate environment.
Public Storage (PSA)
PSA, a member of the S&P 500 and FT Global 500, is a REIT that primarily acquires, develops, owns, and operates self-storage facilities. With thousands of locations across the U.S. and Europe, PSA has more than 170 million net rentable square feet of real estate.
PSA’s self-storage facilities revenue increased 22.9% year-over-year to $840.51 million for its fiscal third quarter, ended September 30, 2021. Its net income was $491.63, up 50.9% year-over-year. Also, its EPS came in at $2.52, up 78.7% year-over-year.
For its fiscal 2021, analysts expect PSA’s revenue to be $3.38 billion, representing a 16.1% year-over-year rise. In addition, the company’s EPS is expected to increase 40.4% year-over-year to $8.83 in the current year. Also, it surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 63.6% in price to close yesterday’s trading session at $372.62.
PSA’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has a B grade for Momentum, Stability, Sentiment, and Quality. Within the REITs - Industrial industry, PSA is ranked #1 of 21 stocks. Click here to see the additional POWR Ratings for Growth and Value for PSA.
Weyerhaeuser Company (WY)
WY is one of the world's largest private owners of timberland, which began operations in 1900. It owns or controls approximately 11 million acres of timberland in the U.S. and manages additional timberland under long-term licenses in Canada.
On October 29, 2021, Devin W. Stockfish, the company’s president and CEO, said, "Our teams did an exceptional job navigating these headwinds and I'm extremely proud of their collective focus on operating safely, strong execution and continuing to serve our customers.”
WY’s net sales increased 11.1% year-over-year to $2.35 billion for its fiscal third quarter, ended September 30, 2021. Its net earnings came in at $482 million, up 70.3% year-over-year, while its EPS increased 68.4% year-over-year to $0.64. Furthermore, its adjusted EBITDA was $746 million, compared to $745 million in the year-ago period.
Analysts expect WY’s revenue to increase 34.3% year-over-year to $10.12 billion in its fiscal 2021. Its EPS is estimated to grow 160.5% year-over-year to $3.36 in the current year. Over the past year, the stock has gained 22.1% in price to close yesterday’s session at $40.68.
WY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. WY has a B grade for Value, Momentum, Sentiment, and Quality. Within the REITs - Diversified industry, it is ranked #4 of 48 stocks. Click here to see the additional POWR Ratings for Growth and Stability for WY.
Regency Centers Corporation (REG)
REG is the preeminent national owner, operator, and developer of shopping centers in affluent and densely populated trade areas. Operating as a fully integrated real estate company, REG is a qualified real estate investment trust (REIT) and an S&P 500 Index member.
On November 4, 2021, Lisa Palmer, President & CEO, said, “We are very pleased with another quarter of solid results and continued improvement in operating trends, further accelerating our path to recovery. The dividend increase reflects our confidence in the recovery of NOI and balance sheet strength to pre-pandemic levels, as well as a return to sustained growth over the long term.”
REG’s net income increased 825.3% year-over-year to $117.41 million in the third quarter, ended September 30, 2021. Its core operating earnings came in at $163.88, up 39.6% year-over-year, and its NAREIT Funds from operations was $192.61 million, up 89.4% year-over-year.
Analysts expect REG’s revenue and EPS to grow 14.6% and 730.8%, respectively, year-over-year to $1.13 billion and $2.16 in fiscal 2021. Over the past year, the stock has gained 64% in price to close yesterday’s trading session at $74.29.
REG’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which translates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth, Momentum, and Stability. It is ranked #5 of 35 stocks in the REITs - Retail industry. Click here to see the additional POWR Ratings for REG (Value, Sentiment, and Quality).
Lamar Advertising Company (LAMR)
LAMR is one of the largest outdoor advertising companies in North America, with more than 352,000 displays across the United States and Canada.
On December 07, 2021, LAMR announced its acquisition of Colossal Media, the leading operator of hand-painted walls and murals. LAMR’s CEO Sean Reilly said, “Colossal has set the standard for colorful, creative artwork that brightens city landscapes, creates buzz and produces results for the world’s best-known brands. Kelly and her outstanding team are well-positioned for further growth, and we at Lamar look forward to partnering with them to lift Colossal to new heights of success.”
LAMR’s net revenues came in at $476.89 million for the third quarter, ended September 30, 2021, up 23.5% year-over-year. Its net income was $106.84 million, up 70.2% year-over-year, and its EPS increased 69.4% year-over-year to $1.05.
LAMR’s revenue is expected to increase 12.8% to $1.77 billion in its fiscal 2021. Its EPS is estimated to increase 57.3% to $3.79 in the current year. It surpassed the EPS estimates in three of the trailing four quarters. And over the past year, the stock has gained 48.1% in price to close yesterday’s trading session at $120.67.
LAMR has an overall B rating, which translates to a Buy in our POWR Ratings system. It has a B grade for Momentum, Sentiment, and Quality. LAMR is ranked #5 of 48 stocks in the REITs - Diversified industry. Click here to check other additional ratings for LAMR (Growth, Value, and Stability).
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PSA shares were unchanged in premarket trading Thursday. Year-to-date, PSA has gained 65.76%, versus a 29.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.