Resilient real estate stocks are an apt choice amid uncertainty heading into 2022. These are 12 of the best REITs to consider in the new year.
Real estate investment trusts (REITs) should finish 2021 as
one of the stock market's top performing sectors, barring a surprise late-year
disaster. And investors positioned in the best REITs could be set up for a
productive 2022.
The main reason REITs remain so popular with investors year
after year is the reliable strength of their dividends. Remember: REITs are
required to pay out at least 90% of their taxable profits as dividends (in
return for some generous tax breaks). And even after a year of big stock price
gains, real estate stocks continue to offer impressive yields. The average
yield on REITs is presently 2.9%, or more than twice the 1.3% average yield on
the S&P 500. Many of the market's best REITs deliver even more income.
But there are other catalysts pointing specifically to
strong REIT performance in 2022.
A major growth driver is the strengthening U.S. economy,
which is increasing occupancy rates and rents for real estate in the
industrial, housing and shopping-center industries, among others.
"As commercial activity and day-to-day life normalize,
demand for commercial and residential real estate space will continue to
recover," says State Street Global Advisors. "Combined with higher
rent inflation in 2022, this supports REIT dividend growth and potential
valuation appreciation."
Indeed, unlike most other businesses, real estate investment
trusts typically benefit from inflation. That's because of the structure of
REIT leases, which allow frequent rent hikes, as well as rent increases linked
to the consumer price index (CPI). Inflation also increases the worth of REIT
assets, thus making their portfolios more valuable.
With that in mind, here are the 12 best REITs to buy for
2022. These 12 names stand out because of generous dividends, low valuations,
growth prospects, or in most cases, a combination of these and other
attributes.
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