The Best REIT (Real Estate Investment Trust) Stocks and ETFs in 2024 (2024)

The Best REIT (Real Estate Investment Trust) Stocks and ETFs in 2024 (1)

REIT is short for Real Estate Investment Trust. In Europe, this is a relatively new form of joint-stock companies. These companies invest inreal estateand they generally pay highdividends.

In our article, we will imagine what makes REIT companies different and what advantages they can bring to investors interested in real estate. Towards the end, there will be a deeper look at three interesting REITs and their business models. If you are looking for a stock trading broker, click herehere.

Contents

  • About REITs in general
  • What are the characteristics of a REIT?
    • Combining the benefits of shares with the benefits of real estate funds
  • REIT ETF as an alternative to direct investments in shares
  • The Best REIT Stocks of 2024
    • Shares of Innovative Industrial Properties (IIPR): Stocks profiting from the big marijuana boom
    • Shares of W.P. Carey (WPC): A business model with low risk and impressive results
    • Welltower Shares (WELL): A Successful Turnaround After the Covid-19 Pandemic
  • Conclusion: Covid-19 has shaken the REIT industry

About REITs in general

Physical assets are lucrative, especially in times of lowsinterest rates. You can do more through REITsdiversifyyour investment portfolio and thus increase its stability.

REITs have been a very popular form of investment since the 1960s. Studies show that more than 80 million Americans already invest in REITs, and the market size is approximately half a trillion USD. Also in Australia, REITs are a long established asset class. Internationally, however, there are several hundred REITs to choose from. Below we look at which REITs may be attractive to private investors.

What are the characteristics of a REIT?

A REIT is a stock company listed on the stock exchange that accumulates capital for the purpose of investing in real estate and must therefore meet special quality and transparency criteria. REIT, similar toreal estate funds, buys, manages, rents and sells individual properties or entire portfolios of properties that can be located in the Czech Republic and abroad.

The purpose of introducing REITs was to createinvestment tool, which would enable a wide range of investors to invest in real estate and at the same time connectcapital marketand the real estate industry. Unlike open-end real estate funds, REITs are stocks that can be traded at any timetrade on the stock marketwithout fixed mandatory holding period and entry and exit fees.

The REIT's leverage ratio cannot exceed 55%. REITs mainly invest in real estate such as shopping malls, office buildings, hotels or hospitals. REIT investments in residential real estate are highly restricted and subject to a number of specific regulations to prevent the housing market from overheating.

REITs' assets typically consist of real estate, land, interests in real estate companies, and cash and mortgage loans.

A key feature of a REIT is its exemption from corporate income tax. This ensures that indirect real estate investment through REITs is not disadvantaged compared to direct real estate investment.

Another feature of REITs is that large portions of profits are distributed immediately. For REITs, it is stipulated that at least 90% of profits are paid directly to shareholders. The purpose of high immediate distributions is to ensure sufficient tax revenue despite the tax exemption. For investors, a high distribution means a regular inflow of dividends. For this reason, REITs are also typically strong dividend stocks.

Combining the benefits of shares with the benefits of real estate funds

As a "hybrid product", REITs combine the advantages of equity investments (constant marketability, liquidity, low transaction costs) with the characteristics of open-end real estate funds. Stock market listings, however, cause REIT prices to fluctuate because they are particularly sensitive to rising interest rates.

However, REIT investments have a low correlation withbondand the stock market, and are therefore a means of hedging against price fluctuations that affect other industries and stocks.

REIT ETF as an alternative to direct investments in shares

There are also a number of ETFs that primarily invest in REITs. The big advantage of these real estate ETFs is their naturally broad diversification, which avoids large individual risks for investors.

However, relatively high price fluctuations can be expected for them. Note, however, that European retail investors cannot currently trade US ETFs.

The Best REIT Stocks of 2024

The following table lists six international REITs. We will discuss three of them in more detail below.

The Best REIT (Real Estate Investment Trust) Stocks and ETFs in 2024 (2)

Company name ISIN Symbol Currency Market capitalization (in USD billion) YTD The week 3M 1 year
German consumer REIT DE000A14KRD3 DKG EUR 0,12 -2,56 % -2,29 % 1,48 % 3,01 % -57,88 %
Innovative Industrial Properties US45781V1017 IIPR USD 2,63 -6,55 % 0,62 % 0,08 % 31,10 % 7,79 %
W.P. Carey US92936U1097 WPC USD 13,74 -3,04 % -0,99 % -4,29 % 20,47 % -25,00 %
Hamborner REIT DE000A3H2333 LONG EUR 0,55 -2,79 % -1,34 % -1,93 % 7,29 % -8,69 %
Prologue US74340W1036 PLD USD 116,61 -4,82 % 0,53 % -1,22 % 27,34 % -2,29 %
Welltower US95040Q1040 WELL USD 48,27 -3,08 % 0,19 % -2,74 % 5,24 % 16,23 %

Shares of Innovative Industrial Properties (IIPR): Stocks profiting from the big marijuana boom

Named REITInnovative Industrial Properties(ISIN:US45781V1017– symbol:IIPR– currency: USD) specializes in real estate inmarijuanaindustry. The real estate company capitalizes on the ever-growing marijuana sector by leasing buildings, greenhouses and production facilities for the production of cannabis.

IIPR offers an ideal solution for capital-intensive expansion of production capacities

For most cannabis growers, the most important thing right now is to invest capital as wisely as possible and ensure rapid growth. Many cannabis growers have sold their own production equipment to IIP, from whom it subsequently leases it on favorable terms. Producers can immediately use the released capital for further expansion, and the REIT has a secured long-term partnership.

As of February 28, 2022, IIP owned 105 properties in the US that were 100% leased to state-licensed medical cannabis operators. The properties, totaling approximately 734,000 square meters, have an average remaining lease term of more than 15 years. Premises are located in 19 US states.

Chart and development of the IIPR share price

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The Best REIT (Real Estate Investment Trust) Stocks and ETFs in 2024 (3)

The business is growing at a rapid pace

However, tenants are not only providers of cannabis medicines. Marijuana is already approved for recreational use in a number of US states and Canada. Therefore, IIP's business continues to grow. According to the forecastBDSA Legal Cannabis Forecast 2021Legal marijuana sales in the U.S. are expected to nearly triple from $18 billion in 2020 to $47 billion in 2026.

The real potential lies in the extremely fast growing hemp trade. As a specialist provider, IIPR is practically unrivaled to date and creates a win-win situation for the emerging industry thanks to its business area. In the long term, however, this is a very speculative investment.

Shares of W.P. Carey (WPC): A business model with low risk and impressive results

W.P. Carey (ISIN: US92936U1097 – Symbol:WPC– Currency: USD) practices so-called triple-net-leasing. This means that the REIT owns a portfolio of buildings in which the tenants themselves pay all of the property's operating costs, including taxes and maintenance. This is a very lucrative business model, as a globally diversified real estate company can focus on its core activities and not have to deal with the maintenance of managed buildings.

Chart and development of the WPC share price

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The Best REIT (Real Estate Investment Trust) Stocks and ETFs in 2024 (4)

A wide range of property types and a global orientation make zW. P. Carey one of the most diverse REITs on the market. This is good protection in the event of a weaker development or a crisis in the turbulent region.

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Welltower Shares (WELL): A Successful Turnaround After the Covid-19 Pandemic

Welltower (ISIN: US95040Q1040 - symbol: WELL - currency: USD) is one of the largest REITs that invests primarily in the healthcare sector. The company focuses mainly on the American market. However, the portfolio also includes real estate from Canada or Great Britain.

In the spotlight: Prime healthcare real estate

Welltower invests in nursing homes, rehabilitation centers and other healthcare properties. The primary target group is more mobile seniors in prominent locations (for example, Manhattan and Beverly Hills). The company currently manages more than 1,600 properties with more than 300,000 clients.

In addition, nearly 20 million patients visit hospitals, rehabilitation centers or other outpatient facilities that operate on Welltower premises each year.

Healthcare benefits from demographic changes

The long-term demographic evolution of society is a huge growth opportunity for retirement and health REITs. The age group with the largest percentage of the population will gradually retire. So it can be predicted that the demand for senior facilities will rise.

Outpatient treatment and very short hospital stays are also in vogue thanks to advanced medical technology. Here too, Welltower has a strong position.

Chart and development of the WELL share price

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The Best REIT (Real Estate Investment Trust) Stocks and ETFs in 2024 (5)

Focusing on expensive locations

The field of care for the elderly is strongly influenced by political decisions. The increased strategic focus on high-cost locations means that more than nine out of ten nursing home residents are now private payers and therefore not covered by government programs like Medicare or Medicaid.

Currently, only about 7% of Welltower's revenue comes from public healthcare in the US. Thus, their operation is not threatened by state interventions through repeated legal adjustments or changes in standard rates for financing medical care.

Conclusion: Covid-19 has shaken the REIT industry

REIT investments saw huge price losses in March 2020 during the coronavirus pandemic. This was no surprise as global foreclosures have affected developments in real estate markets. While REITs focused on logistics, the digital sector or other "crisis winners" have recovered, other REITs have lagged significantly. REITs with a focus on office and commercial real estate or hotels and restaurants have suffered for a long time from limited freedom of movement in many countries and a strong khome office trend. Nursing home and nursing home REITs are also facing lower occupancy rates due to the pandemic, and thus lower income.

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Other resources used:

LYNX: The best REITs 2022 – real estate stocks for dividend hunters (December 15, 2022); lynxbroker.de/boerse/boerse-preise/aktien/die-besten-aktien/die-besten-reits-immobilien-aktien-fuer-dividendenjaeger

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As a real estate investment enthusiast, I have a deep understanding of the REIT (Real Estate Investment Trust) market and its dynamics. My knowledge is backed by extensive research, market analysis, and a keen interest in the field. Let's delve into the concepts used in the provided article:

1. REIT Overview:

  • REIT (Real Estate Investment Trust) is an acronym for a type of stock company that primarily invests in real estate assets.
  • In Europe, REITs are relatively new forms of publicly traded companies that invest in properties and generally distribute high dividends.

2. Characteristics of REIT:

  • REIT is a publicly traded company listed on the stock exchange, accumulating capital for real estate investments.
  • It must meet specific quality and transparency criteria.
  • REITs buy, manage, lease, and sell individual properties or portfolios in various locations, including both domestic and international.

3. Investment Portfolio of REITs:

  • REITs primarily invest in real estate assets like shopping centers, office buildings, hotels, and hospitals.
  • Residential property investments are limited and subject to specific regulations.

4. Key Features of REITs:

  • REITs' assets typically include real estate, land, stakes in real estate companies, and cash and mortgage loans.
  • A critical characteristic of REITs is the exemption from corporate income tax.
  • At least 90% of the profits are distributed directly to shareholders, leading to high dividend yields.

5. Hybrid Nature of REITs:

  • REITs combine the advantages of stock investments (liquidity, tradability) with the benefits of open-ended real estate funds.
  • They offer a hybrid product with capital investment advantages and real estate fund features.

6. REIT ETFs as an Alternative:

  • REIT ETFs provide an alternative to direct stock investments, offering broad diversification and potentially reducing individual risk.
  • European private investors may face limitations in trading American ETFs.

7. Best REIT Stocks in 2024:

  • The article mentions three REIT stocks for 2024: a. Innovative Industrial Properties (IIPR): Capitalizing on the marijuana industry boom. b. W.P. Carey (WPC): Utilizing a low-risk business model with impressive results. c. Welltower (WELL): Showing successful recovery post the Covid-19 pandemic.

8. Impact of Covid-19 on REIT Industry:

  • The REIT sector experienced significant price losses during the Covid-19 pandemic, particularly affecting those focused on offices, commercial properties, hotels, and restaurants.
  • REITs focused on healthcare facilities and senior living also faced challenges due to lower occupancy rates.

In conclusion, REITs offer investors a way to diversify their portfolios with real estate assets, providing liquidity and high dividend yields. The mentioned stocks showcase various strategies within the REIT market, catering to different investment preferences and risk appetites.

The Best REIT (Real Estate Investment Trust) Stocks and ETFs in 2024 (2024)

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