Top Real Estate Stocks to Buy Now

Posted on August 8, 2022

by Stacy Brooks

Stock Ideas

KEY POINTS

AvalonBay is a superior apartment REIT.
Realty Income has a lengthy history of increasing its dividend.
W.P. Carey’s diverse approach has paid handsome dividends for investors in the past.

Real estate has long been a sound investment, especially for these top real estate stocks to buy now. It can produce higher returns and passive income with less volatility than equities. As a result, it’s an excellent addition to any portfolio.

To start real estate investing, you don’t need much money. REITs are inexpensive, allowing anybody with $1,000 (or less) to add some real estate to their portfolio. The three best choices for new investors are AvalonBay Communities (NYSE:AVB), Realty Income (NYSE:O), and W.P. Carey (NYSE:WPC).

AvalonBay Communities

AvalonBay Communities is one of the biggest apartment landlords in the United States. The residential REIT has investments in 299 apartment complexes across a dozen states and 17 additional developments underway. In recent years, the business has prioritized high-cost coastal cities and expanded into faster-growing southeast regions.

The company’s diversified apartment portfolio delivers increasing rental income. It can raise rents due to the growing demand for apartments and restricted housing availability. The firm is attempting to tackle the country’s housing challenges by developing new apartment communities and providing funding to other builders through its structured investment program. These facts help lead to AvalonBay’s improving cash flow, allowing it to pay a lucrative and expanding dividend that currently yields more than 3%.

The payout is well-grounded. This REIT pays out less than 70% of its cash flow to support its dividend, giving it plenty of cushioning and allowing for future growth. It also has a solid financial profile. As a result, this makes it an excellent real estate stock because it should be able to pay a growing dividend while still delivering high total returns.

Realty Income

Realty Income focuses on operating free-standing commercial properties, primarily leased to businesses and industrial concerns. It leases over 11,000 properties in the United States and Europe to long-term contracts with high-quality tenants.

Realty Income’s portfolio is highly resilient and provides a consistent dividend to the firm. In addition, it makes regular monthly payments rather than quarterly ones, making it ideal for people seeking passive real estate income.

The Realty Income dividend has been increasing. Since its IPO in 1994, it has given investors 116 boosts, a 4.4% compound annual growth rate, and raised payouts every time. With a conservative payout ratio and a solid balance sheet, Realty Income has the financial flexibility to expand its portfolio further. That should allow the REIT to raise its payout even more in the future.

W.P. Carey

W.P. Carey has a diversified real estate portfolio. The REIT invests in economically essential assets, such as industrial, warehouse, office, retail, and self-storage properties. High-quality tenants lease these properties under long-term leases that provide W.P.Carey with steady rental income.

The diversified REIT pays a competitive dividend, which currently yields around 5%. It has increased its payout every year since it went public in 1998. In the future, W.P. Carey should be able to continue boosting that payout. Its strong financial position allows it to continue acquiring cash-flowing properties. The firm has already completed $1.1 billion of transactions this year and expects to achieve $1.75 billion-$2.25 billion more by 2022’s end. Meanwhile, it acquired another REIT for $2.7 billion. These discounts should increase rental income, allowing it to sustain the dividend.