7 Top-Rated REITs to Pack Into Your Portfolio Today

One thing that hurts real estate investment trusts (REITs) is inflation. The more expensive property is to finance, the more expensive it is for them to finance growth or improvements to current properties.

There’s a lot of talk — and evidence — that inflation is growing, but The Powers That Be (aka, the Federal Reserve) say this is just a temporary phase as the economy level sets after the pandemic.

Job growth looks to be returning fairly quickly. Companies continue to hire, and service companies are desperate for workers. That all means rising wages and increasing consumer demand.

Add to that the fact that people are returning to stores and offices. They’re also going on vacations again. And some of those new hires are moving for their new jobs, which means storage REITs are seeing more business again.

The seven top-rated REITs here are in key growth markets and will perform well as the economy expands.

  • AGNC Investment Corp (NASDAQ:AGNC)
  • CubeSmart (NYSE:CUBE)
  • Iron Mountain (NYSE:IRM)
  • Life Storage (NYSE:LSI)
  • Ryman Hospitality (NYSE:RHP)
  • Public Storage (NYSE:PSA)
  • Annaly Capital Management (NYSE:NLY)

Top-Rated REITs: AGNC Investment Corp (AGNC)

Source: Shutterstock

In hot housing markets, REITs that focus less on real estate but mortgage-backed securities (MBS) are in their element. People are writing mortgages at a rapid clip and these REITs buy those MBS that are the mortgages stripped and built for sale in the secondary market.

So far, this housing market has been more famous for its pricing than its volume, which makes total sense since high demand and low supply equal rising prices.

However, now that lumber prices are down and housing supplies are back in production, supply should be ratcheting up. As long as rates stay relatively low, which they should, home sales should increase into the second half of the year.

That’s great news for AGNC. The stock is up 9% year to date, with a big 8.5% dividend. And it’s trading at a current price-to-earnings ratio of just 3x.

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It has an ‘A’ rating in my Portfolio Grader.

CubeSmart (CUBE)

image of a storage cube

Source: Shutterstock

One of the best REIT sectors in the past decade has been storage REITs. After 2008, people were either downsizing or moving to look for new work opportunities. And they needed places to store their stuff once they got to a new place. Or, if they were downsizing, they needed a place to keep the things they couldn’t fit in their new digs.

Either way, storage REITs fit the bill. This had been a very fragmented industry with small players in almost every town. Part of the reason is, they’re cheap to build and maintain relative to office buildings.

Since 2008, big storage REITs have been buying up independent facilities or simply building their own, consolidating the market. CUBE is one of those eager players.

It has a $9 billion market cap, and the stock is up 44% year to date. It has a 2.9% dividend. However, CUBE’s P/E is a bit high here, although earnings should catch up with its price.

It has an ‘B’ rating in my Portfolio Grader.

Top-Rated REITs: Iron Mountain (IRM)

Iron Mountain (IRM) logo on truck

Source: Shutterstock

Data is increasingly more valuable to many companies than property. While IRM started with more humble beginnings in 1951, today it’s a REIT that focuses on data more than it focuses on real estate. It’s a REIT that’s pretty detached from real estate.

That’s a good thing for REIT investors looking to diversify or investors that want a REIT that doesn’t come with a lot of interest rate sensitivity many REITs are strapped with.

One of IRM’s biggest money makers is document security, maintenance and disposal. All these need to be reliable and secure, because even physical documents have value if not disposed of properly, with a transparent chain of custody.

IRM has operations around the world, with more than 22,000 employees. And its business is only going to grow. The stock is up 47% year to date and it delivers a 5.8% dividend.

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It has an ‘A’ rating in my Portfolio Grader.

Life Storage (LSI)

Life Storage (LSI) sign on the side of one of its facilities in Illinois.

Source: Jerry Bergquist / Shutterstock.com

This storage REIT has been around almost 40 years now, starting in the Buffalo, New York, area. It now has operations in 33 states and sports a $8 billion market cap.

LSI is growing by acquisition and that has sped up in the past decade or so, similar to CUBE. It also focuses on similar demographics, although it does offer commercial, vehicle and wine storage services.

A new business for storage REITs is the growth of e-commerce businesses and storage units for those companies, including major e-commerce brands. This adds another layer of opportunity for LSI.

The stock is up 42% year to date, and it has a 2.7% dividend. It’s a bit pricey now, but earnings will certainly catch up.

It has an ‘A’ rating in my Portfolio Grader.

Top-Rated REITs: Ryman Hospitality (RHP)

Image of Grand Ole Opry exterior

Source: Shutterstock

Have you ever been to the Grand Ole Opry in Nashville? If not, my guess is that you’ve heard of this Mecca of country music. Well, it’s owned by RHP.

But RHP is much larger than that. It also owns the Gaylord brand of hotels and resorts that are in major tourist and business destinations like Washington, DC, Orlando, Dallas and Denver. Plus, its properties in Nashville include a riverboat, radio station and television station.

With overseas travel limited and many businesses looking to smaller cities like Nashville to set up post-pandemic operations, RHP is well prepared to take on the growing wave of tourists and business travelers.

RHP has a $4 billion market cap but reorganizing its business and the effects of the pandemic have put its earnings in the red. But that won’t last long. The stock is up 18% year to date.

It has an ‘B’ rating in my Portfolio Grader.

Public Storage (PSA)

a Public Storage sign in front of a facility of storage buildings

Source: Ken Wolter / Shutterstock.com

The big differentiator between PSA and its competitors CUBE and LSI is size. Its market cap is about 6x the size of the other two. It has been around for nearly 50 years and has operations in the U.S., Canada and Europe.

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Its large market cap in such a high-margin, cash-heavy business means it has that much more to spend on acquisitions and new builds. Plus, its longevity shows that it can survive in almost any economic climate.

However, its size also means that it’s the default buy in the sector for institutions, which limits its ability for the dynamic growth of its smaller rivals. But PSA is still up 37% year to date, with a 2.7% dividend.

It has an ‘A’ rating in my Portfolio Grader.

Top-Rated REITs: Annaly Capital Management (NLY)

a person in a suit holds a tiny house to represent reits to buy

Source: Shutterstock

Closing the circle on these top REITs is NLY, a REIT that is similar to AGNC. It buys MBS and other mortgage securities and then trades them. NLY also operates in the commercial markets as well as the private equity markets.

The upside of this strategy is NLY doesn’t own any properties, so it’s more flexible than traditional REITs. It also means that it delivers a big dividend — currently at 9.8%.

But this can be a very volatile sector. When things are good, they’re very good. And when they’re bad, they’re very bad. We’re on the upcycle now, however, and NLY is trading at a current P/E below 3x. The stock is up 7% year to date.

It has an ‘A’ rating in my Portfolio Grader.

On the date of publication, Louis Navellier has a position in CUBE. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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