Retail REITs are experiencing a surge in popularity as the post-pandemic economic boom takes hold. With people venturing out more and businesses reopening, investors are starting to take notice. If you're wondering if now is the right time to invest in retail REITs, look no further. We have compiled a watchlist of the best retail REITs to buy now.
Realty Income Corp. (NYSE: O)
Realty Income Corp. is a well-established trust and one of the largest retail REITs in the market. With a market cap of nearly $40 billion, Realty Income owns and operates 11,700 retail properties under long-term, net-lease agreements. The trust has a remarkable track record, delivering a compound annual total return of 14.4% since 1994. Investors have also benefited from the trust's monthly dividend payments, with over 629 dividends declared since its inception.
Retail REITs
Realty Income's portfolio is highly diversified, focusing on retail sectors that are well-equipped to weather economic downturns and the rise of eCommerce. Its top investment categories include grocery stores, convenience stores, dollar stores, fast food restaurants, and drug stores. The trust recently reported impressive earnings, with revenues of $836.6 million, a 71% increase from 3Q 2021. The trust's funds from operations (FFO) are also up 80% from last year, indicating a strong financial position.
Phillips Edison & Company, Inc. (NASDAQ: PECO)
PECO is one of the largest owners and operators of grocery-anchored shopping centers in the United States. With a market cap of nearly $4 billion, PECO offers investors a dividend yield of 3.68%. The retail REIT has consistently outperformed expectations, surpassing FFO consensus in the last four quarters. In Q3, PECO reported revenues of $145.65 million, beating last year's revenues. PECO's success can be attributed to its focus on grocery-anchored shopping centers, which have seen increased demand and higher rents due to consumers' preference for open-air locations.
National Retail Properties (NYSE: NNN)
National Retail Properties specializes in owning freestanding retail stores across the United States. With a portfolio of over 3,300 retail properties and a remarkable 99.4% occupancy rate, NNN is a reliable choice for investors. The retail REIT's top tenants include well-known companies like 7-Eleven, Mister Car Wash, and LA Fitness. NNN has also increased its dividend for the past 33 consecutive years, offering investors a 5% annual yield. In addition to its attractive dividend, NNN has an average annual return of 11.6%.
Simon Property Group (NYSE: SPG)
Simon Property Group is one of the largest shopping mall REITs in the retail space, with a market cap of $43 billion and over 190 million square feet of retail space under its control. The REIT's portfolio includes iconic properties like CityOn in China, Sawgrass Mills in Florida, and The Shops at Crystal in Las Vegas. Simon Property Group offers investors a generous 6.24% annual dividend yield. In its recent earnings report, the REIT reported significant revenue growth and an impressive increase in occupancy rates.
Retail REITs
KIMCO Realty Corp. (NYSE: KIM)
KIMCO Realty Corp. is North America's largest publicly traded owner and operator of open-air, grocery-anchored shopping centers. With a growing portfolio of 536 properties valued at $13 billion, KIMCO offers investors stability and potential growth. The REIT recently reported strong Q3 earnings, surpassing expectations for FFO and revenue. KIMCO provides increased forward guidance, indicating its confidence in future growth. In addition to its potential for capital appreciation, KIMCO offers a dividend yield of 4.36%.
Slate Retail REIT (OTCMKTS: SRRTF)
Slate Retail REIT focuses on grocery-anchored retail spaces, which make up 93% of its assets. With 121 retail properties valued at $2.4 billion, Slate Retail REIT offers one of the highest dividend yields in our list at 7.66% annually. The REIT has a growth-oriented investment strategy, focusing on maximizing growth opportunities after acquiring a property. In its latest earnings report, Slate Retail REIT reported significant FFO growth and a favorable debt structure.
SITE Centers Corp. (NYSE: SITC)
SITE Centers Corp. wholly owns 103 retail shopping centers across the country, with a focus on wealthy neighborhoods and established tenants. With a market capitalization of over $4 billion, SITE Centers offers investors a dividend yield of 4.22%. The REIT's Q3 earnings beat expectations, indicating a positive outlook for growth. SITE Centers' strategy of targeting wealthy neighborhoods with high household incomes provides stability and potential for long-term success.
Are Retail REITs a Good Investment?
Retail REITs can be an excellent investment option for those seeking high dividend yields and a relatively stable environment. By investing in retail REITs, you can capitalize on real estate opportunities that would otherwise be inaccessible. These REITs offer a unique opportunity to have exposure to shopping malls, outlet centers, and shopping centers without the need for significant upfront capital.
As fears of a recession loom and growth stocks deliver negative returns, retail REITs can provide safety and potential income. The ongoing post-pandemic economic boost, along with positive forward guidance from most retail REITs, suggests that the sector's momentum may continue into the next quarter. Investors can potentially benefit from both dividend income and capital appreciation.
However, it's important to exercise caution as the retail sector does face some risks. The rise of eCommerce and the potential for an economic downturn could impact occupancy rates. Additionally, the Federal Reserve's increase in interest rates may pose challenges for businesses, including REITs. While some REITs have fixed interest rates that offer some stability, their expansion capabilities may be limited.
In conclusion, retail REITs can be a great investment option for those looking to diversify their portfolios and capitalize on the real estate market. However, thorough research and consideration of the risks involved are essential. With the right strategy and careful analysis, retail REITs can offer both income and long-term growth potential.
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