Investors who’ve had a tough year may want to consider the top REITs or real estate investment trusts to buy. Acquiring a quality REIT can be a smart idea, as it is often structured as a company that owns or finances income-producing properties across a variety of real estate categories. Moreover, potential changing trends in 2024 could further increase that opportunity.
First of all, the long-awaited recession that Wall Street feared last year never materialized. The economy hasn’t been doing well. But the situation could have been much worse. Dodging a devastating bullet could give both consumers and investors more confidence. And that could benefit certain REIT purchases.
Second, and most importantly, the Fed has signaled the possibility of rate cuts this year. Nothing is set in stone and things can change. But it also represents a clear shift from its previous hawkish position.
If dovism ultimately reigns supreme, these will be the top REITs to buy.
WP Carry (WPC)
Comprehensive net lease REIT, WP Carry (New York Stock Exchange:WPC) primarily invests in single-tenant properties, where most of the associated operating costs are borne by the tenant. This includes property taxes, insurance, and maintenance. Covers several property types, particularly industrial and warehouse. Another characteristic is that it has a large impact on retail businesses such as grocery stores and drug stores.
Fundamentally, WPC could benefit from the potential for higher consumer sentiment associated with lower interest rates. Consider how many people kept their wallets open during the holidays. It’s just that the payment mechanism has changed using the Buy Now Pay Later (BNPL) platform. So perhaps alleviating the pesky hurdle of high interest rates should increase spending.
This thesis makes sense as the labor market is surprisingly strong. So, again, WPC should be one of the top REITs to buy once all the obstacles to spending are eased. To add insult to injury, the stock trades at just 11.21x FFO, lower than the sector median of 13.45x.
Weyerhaeuser (Wyoming)
timberland company, weyerhaeuser company (New York Stock Exchange:wyoming) owns approximately 12.4 million acres of forestland in the United States. Additionally, its public profile states that the company manages an additional 14 million acres of forest under long-term licenses in Canada. Notably, it has been in business since 1900. That makes Wyoming a great buying destination for top REITs from a reliability perspective.
Regarding the underlying forestry and logging operations, the sector’s market valuation reached $322.25 billion worldwide. By 2028, this sector is expected to reach $437.39 billion. If so, the compound annual growth rate (CAGR) would be 6.3%. Furthermore, lower interest rates could lead to a boost in the forestry industry. For example, easier financing for residential real estate could increase demand for wood products.
Granted, the price to FFO ratio is 21x, so Wyoming doesn’t necessarily offer a discount. However, the company is characterized by solid revenue and EBITDA growth. What’s more, analysts give the stock a consensus rating of Moderate Buy, so it might be worth another look.
Tangier (SKT)
You could go with the basic idea of buying top REITs to round out this list, but I decided to go the speculative route. Tangier (New York Stock Exchange:S.K.T.). Tanger, his REIT focused on shopping centres, saw significant gains in the second half of 2023, giving him more than 25% of its share value. For the year, SKT is up almost 57%.
Naturally, SKT raises concerns about holding the bag. It’s worth noting that analysts have an average price target of $24.60, maintaining consensus on the stock. This equates to a downside risk of more than 11% for him. If you’re looking for a confidence booster, SKT isn’t for you. However, a potential shift in monetary policy could favor REITs.
As mentioned earlier, consumers continued to spend during the holidays. But there is also data to suggest that caution has increased during the difficult past year. Notably, the personal savings rate rose from 3.3% in November 2022 to 4.1% in November 2023. This may indicate a wider range of discretionary spending. If so, SKT could become one of the top REITs.
Publication date, Josh Enomoto did not have any positions (directly or indirectly) in any securities mentioned in this article. The opinions expressed in this article are those of the writer and are influenced by InvestorPlace.com. Publishing guidelines.