High-Quality REITs Can Be Great Core Holdings
Building a winning portfolio usually starts with finding a few core holdings that offer a history of reliability and consistent returns. These are stocks that investors can count on through thick and thin and provide the stability needed to confidently take some shots at higher-risk areas of the market. REITs, or Real Estate Investment Trusts, are a good option to consider for core holdings for several reasons.
These securities offer consistent income in the form of dividends, which can be reinvested over time in other equities to grow your portfolio. They also offer exposure to real estate without actually having to put down large amounts of capital. Some investors even look at REITs as a hedge against inflation, as real estate rents and values typically increase when prices do.
If you’re interested in adding some high-quality REITs that could be the backbone of your portfolio, keep reading below.
1. Digital Realty Trust
You likely can’t go wrong betting on the future of data centers, which is why this REIT stands out as a potential core holding. Digital Realty Trust (NYSE:DLR) owns, acquires, develops, and operates data centers that are located in the United States, Europe, Latin America, Asia, Australia, and Canada.
The company has 280+ data centers and over 35 million rentable square feet to offer its tenants, and business has been booming in recent quarters. Digital Realty Trust recently reported Q3 revenues of $1.1 billion, up 11% year-over-year, and signed total bookings that are expected to generate $113 million of annualized GAAP rental revenue during the quarter.
When you stop to consider trends like artificial intelligence, cloud computing, and the Internet of Things which require heavy computing power from data centers, it’s easy to recognize Digital Realty Trust’s upside potential. With 16 consecutive years of dividend increases and an average 5 year weighted average remaining lease term, this is a REIT that investors can potentially count on for consistent returns year after year.
2. STAG Industrial
REITs are unique in that they allow investors to target certain areas of the real estate market, and this one specifically provides exposure to industrial properties. This area of the real estate market has been on fire lately, as these spaces are often used for logistics purposes. That’s a big reason why STAG Industrial (NYSE:STAG) is a name that should be on your buy list, as it’s a company that is focused on the acquisition, ownership, and operation of single-tenant, industrial properties in the United States.
The company’s portfolio of properties is heavily focused on e-commerce, which is very attractive given that consumer preferences have permanently shifted to online shopping. In fact, STAG Industrial leases space to Amazon (NASDAQ:AMZN), which generates around 3.9% of the company’s total rent.
In Q3, the company reported a Net Income of $48.5 million, up 104% year-over-year, and acquired 24 more buildings consisting of 4 million square feet. The bottom line here is that this REIT is an industrial real estate powerhouse riding the e-commerce wave, and the 3.36% annual dividend yield with monthly payouts makes it a top pick for your portfolio.
3. Life Storage
A REIT that you plan to build your portfolio around should have a solid business model that will continue to see demand over the years. That’s the case with Life Storage, as it’s a self-managed real estate investment trust that is the fourth-largest U.S.-based publicly traded operator of self-storage facilities. We’ve seen a lot of people relocate during the pandemic, and this trend should continue as more people gain the opportunity to work remotely from the location of their choice.
There’s also a lot to like about how self-storage companies can raise rental prices without losing a lot of business, as people are very likely to pay more rather than moving all of their belongings to another storage location. In Q3, Life Storage (NYSE:LSI) increased same-store revenue by 17.4% and acquired 29 stores, which tells us that the company continues to grow its portfolio and improve its fundamental position. The stock currently offers a 2.58% dividend yield and could be a strong REIT to buy on dips for any long-term portfolio.