Real estate investment trusts (REITs) are publicly traded companies that allow individual investors to buy shares in real estate portfolios that receive income from a variety of properties. They allow investors to invest easily in the real estate sector, which includes companies that own, develop, and manage residential, commercial, and industrial properties.
Among other requirements, REITs are required to pay out at least 90% of their taxable income as dividends. A key REIT metric is funds from operations (FFO), a measure of earnings particular to the industry. Some big names within the sector include American Tower Corp., Crown Castle International Corp., and Prologis Inc.
The COVID-19 pandemic has significantly disrupted the commercial real estate industry, as workers around the world have adapted to working from home and various lockdown measures have been enacted. Despite the economy’s recovery, the industry’s recovery has been uneven: the corporate office sector generally has performed worse than residential real estate and apartments. Still, the pandemic has been a boon for e-commerce companies, resulting in a surge in demand for related real estate including warehouses and distribution centers.
REITs, as represented by an exchange-traded fund (ETF)—the Real Estate Select Sector SPDR Fund (XLRE)—have outperformed the broader market. XLRE’s 22.8% total return over the past 12 months bested the benchmark Russell 1000 index, which has provided a total return of 6.4%. These market performance numbers and the statistics in the tables below are as of April 19, 2022, except for data from the growth table, which are as of April 20.
Here are the top three REITs with the best value, fastest growth, and most momentum.
These are the REITs with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you’re paying less for each dollar of profit generated.
| Best Value REITs | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing P/E Ratio | |
| Annaly Capital Management Inc. (NLY) | 6.55 | 9.6 | 4.1 |
| New Residential Investment Corp. (NRZ) | 10.49 | 4.9 | 6.8 |
| AGNC Investment Corp. (AGNC) | 11.86 | 6.2 | 10.0 |
Source: YCharts
- Annaly Capital Management Inc.: Annaly Capital invests in real estate and related assets, including agency mortgage-backed securities (MBS), residential and commercial real estate, and middle-market lending.
- New Residential Investment Corp.: New Residential Investment is a public REIT investing in the residential housing sector. The company’s portfolio includes mortgage-servicing related assets, residential loans, non-agency securities, and similar investments.
- AGNC Investment Corp.: AGNC Investment invests mainly in residential MBS on a leveraged basis through collateralized borrowings. It uses an active portfolio management strategy to provide risk-adjusted returns. On April 11, AGNC announced monthly a cash dividend of $0.12 per share of common stock for April 2022. The dividend is payable on May 10 to shareholders of record as of April 29, 2022.
Fastest Growing REITs
These are the top REITs as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.
| Fastest Growing REITs | ||||
|---|---|---|---|---|
| Price ($) | Market Cap ($B) | EPS Growth (%) | Revenue Growth (%) | |
| Boston Properties Inc. (BXP) | 127.69 | 20.0 | 2,260 | 9.9 |
| Digital Realty Trust Inc. (DLR) | 152.67 | 43.4 | 2,200 | 4.6 |
| New Residential Investment Corp. (NRZ) | 10.71 | 5.0 | 106.2 | 119.2 |
Source: YCharts
- Boston Properties Inc.: Boston Properties is a developer, owner, and manager of Class A office properties in Boston, Los Angeles, New York, San Francisco, Seattle, and Washington.
- Digital Realty Trust Inc.: Digital Realty Trust is a REIT that owns, acquires, and manages technology-related properties. The company focuses on data center, colocation and interconnection-related properties. On April 21, the company announced that it had agreed to provide a cash flow guarantee to Singapore-based Digital Core REIT, a publicly traded vehicle that is sponsored by and externally managed by Digital Realty. Earlier in April, Digital Core’s fifth-largest customer, representing roughly $5 million of annualized revenue and over 7% of total revenue, filed for bankruptcy protection. Digital Realty’s agreement guarantees coverage of the customer’s rental income stream to Digital Core REIT in the event of a near-term cash flow shortfall.
- New Residential Investment Corp.: See company description above.
These are the REITs that had the highest total return over the last 12 months.
| REITs with the Most Momentum | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | |
| Life Storage Inc. (LSI) | 147.73 | 12.4 | 62.8 |
| Public Storage (PSA) | 413.17 | 72.5 | 56.6 |
| Extra Space Storage Inc. (EXR) | 218.32 | 29.3 | 55.8 |
| Russell 1000 | N/A | N/A | 6.4 |
| Real Estate Select Sector SPDR Fund (XLRE) | N/A | N/A | 22.8 |
Source: YCharts
- Life Storage Inc.: Life Storage owns and operates self-storage properties in dozens of U.S. states. The company operates over 1,000 storage facilities. On April 1, the company announced quarterly dividend of $1.00 per share of common stock. The dividend will be paid on April 26 to shareholders of record as of April 14, 2022.
- Public Storage: Public Storage is a leading provider of storage units for personal, business and vehicle needs. The company operates over 2,500 locations nationwide. Public Storage announced results for Q4 2021, ended Dec. 31, on Feb. 22. For that quarter, the company reported a sharp increase in net income on total revenue growth of 13.7% YOY. Same store revenues also rose 13.7%. Equity share of gains on sale of real estate contributed to the performance.
- Extra Space Storage Inc.: Extra Space Storage owns, operates, manages, and develops self-storage properties. The company operates over 2,000 stores in 41 states. it also provides tenant reinsurance products.
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