The slow growth, low-interest rate outlook for the global economy’s foreseeable future favors high-yielding, defensive assets like real estate over high-multiple, riskier investments.
REITs are one of the best – if not the best – ways to gain exposure to real estate for several reasons.
This article will discuss 3 of the top REITs for a combination of attractive valuations, growth potential, and high dividend yields.
By the Sure Dividend staff
Real Estate Investment Trusts, also called REITs, are very popular among income investors. There is good reason for this. REITs are arguably the best way for investors to benefit from owning real estate, without having to purchase physical properties.
In addition, REITs are especially attractive for income. With the S&P 500 Index yielding ~2% on average, and further interest rate hikes having been put on hold for the time being, high income is hard to find. Fortunately, many REITs have high yields of 5% or more. You can see our full list of 5%+ yielding dividend stocks here.
In this article we will discuss three high-yield REITs with promising total return potential: Senior Housing Properties Trust (SNH), Brookfield Property Partners/REIT (BPY)/(BPR), and Tanger Factory Outlets (SKT). While not without risks, we believe that these REITs present investors with attractive total return potential by combining a relatively favorable macroeconomic environment, with the advantages that REITs possess and sizable discounts to their underlying net asset values.
Why REITs?
Interest rates appear to be peaking for the foreseeable future (though longer term, they will likely eventually go up again at some point) and global economic growth seems to be slowing down. These observations are confirmed by projections from the Federal Reserve and numerous other well-respected economists that economic growth is projected to slow over the next several years, with some even calling for a recession to hit sometime in the next few years.
The warning signs that this could become a reality include data from major U.S. trading partners showing signs of slowing, if not shrinking economic activity. This list includes much of Europe (in particular Italy, which is already in recession) as well as Asian powerhouses Japan and China. Given these countries’ significant ties to the U.S. economy, it is only a matter of time before these trends hit American shores. The only reason it likely hasn’t yet is due to the still-rippling boost from the 2018 tax cuts as well as the significant roll back of regulations from the Obama era.
