Real estate investment trusts (REITs) have faced their fair share of challenges in recent years. Rising interest rates have taken a toll on the industry, making some investors cautious. However, there are still opportunities to be found in the REIT market. In this article, we'll explore two REIT stocks that have the potential to surge even higher.
The Impact of Interest Rates on REITs
Before we delve into the stocks, let's discuss the impact of interest rates on the REIT market. Over the past year, interest rates have been on the rise, affecting the performance of REITs. As rates increased, investors shifted their focus to other income options like certificates of deposit (CDs). This shift, coupled with the operational challenges that rising rates bring, resulted in a dip in the REIT market.
Image: VNQ Chart
Two Promising REITs Worth Considering
Despite the challenges, there are still attractive options available for investors. Two such options are NNN and Alpine Income Property Trust. Both of these net lease REITs have the potential for significant growth.
NNN: A Reliable Choice
NNN is a well-established player in the net lease space, boasting an impressive 34 years of annual dividend increases. With a diverse portfolio of approximately 3,500 assets, NNN focuses on necessity tenants, providing stability even during economic downturns. Furthermore, the average remaining lease term is over 10 years, ensuring a steady stream of income.
Currently, NNN offers a yield of around 5.3%, which is higher than the average REIT's 4.4% and the S&P 500 Index's 1.4%. If you prefer investing in industry bellwethers, NNN is an excellent choice. With room for recovery, it still has the potential to reach its previous highs.
Alpine: A Hidden Gem
Alpine Income Property Trust may be smaller in size, with a market cap of around $260 million compared to NNN's $7.6 billion. However, it presents an interesting opportunity for more aggressive investors. Despite its modest portfolio of just 138 properties, almost two-thirds of its tenants have investment-grade ratings.
Alpine offers an attractive dividend yield of 6.3%, and since its IPO in late 2019, it has consistently increased its dividend each year. The funds from operations (FFO) payout ratio is reasonable at around 75%, only slightly higher than that of larger industry players like NNN. Additionally, Alpine trades at a discount compared to its peers, providing more potential for growth.
Don't Miss Out on These REIT Opportunities
For conservative investors seeking stability, NNN is a top choice. With its impressive track record and attractive yield, it still has room to grow and recover from the market impact of interest rates. On the other hand, more daring investors may be intrigued by Alpine. Despite its size, it has proven to be a reliable REIT with a higher yield and the potential for significant growth.
In conclusion, while the challenges of rising interest rates have affected the REIT market, there are still opportunities to be seized. By considering stocks like NNN and Alpine, investors can position themselves for potential surges in the REIT market. So don't miss out, act now, and take advantage of these promising investment opportunities.
