The real estate investment trust (REIT) group has faced challenges in the first half of 2024, underperforming as markets adjusted their expectations for Fed interest rate cuts. Real estate is currently the only negative sector on a year-to-date basis, highlighting the struggles this group has encountered. With expectations for maybe one rate cut this year, U.S. REITs closed May at an average 16.5% discount to net asset value (NAV), offering income-focused investors an opportunity to purchase shares at a lower price for a higher effective yield.
For investors interested in the real estate sector, three “Strong Buy” REITs stand out for their attractive yields and growth potential.
1. Agree Realty Corporation (ADC) is a retail-focused REIT with a strong portfolio of properties leased to top retailers. Known for its monthly dividend payments, ADC offers a forward dividend yield of around 4.84%. Despite being down about 2% on a year-to-date basis, ADC’s recent public offering of senior unsecured notes due 2034 provides funding for future opportunities. Analysts project an increase in AFFO per share for 2024, with a consensus “Strong Buy” rating and an average price target of $66.20.
2. Equinix Inc. (EQIX) is a global leader in digital infrastructure, operating data centers across 33 countries. Despite a recent sell-off triggered by a short seller report, Equinix rebounded after its Q1 2024 earnings report, surpassing revenue and AFFO expectations. With a partnership with Dell Technologies and a recent public offering of senior notes, Equinix is positioned for growth in the data center market. Analysts remain optimistic about EQIX stock, with a mean target price of $903.41.
3. American Tower Corporation (AMT) is a major player in wireless and broadcast communications infrastructure, managing over 224,000 communication sites globally. With consistent dividend increases and a forward yield of 3.37%, AMT has maintained stability in its stock price. The company’s proactive debt management and strong Q1 2024 earnings report indicate growth potential in the expanding 5G and data center markets. Analysts rate AMT a “Strong Buy,” with a mean target price of $228.17.
In conclusion, ADC, EQIX, and AMT offer unique investment opportunities within the REIT sector. Despite not trading at a discount, these REITs provide steady dividend payouts, growth potential in digital infrastructure, and positive analyst sentiment. As the market adjusts to lower rate cut expectations, these REITs may present attractive options for investors seeking passive income and long-term growth.
