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Investing and renting out real estate for passive income is excellent but requires much time and energy. Only some investors have the time or energy to manage rentals, hire brokers, find folks to invest in properties, and deal multi-dimensionally. Suddenly, earning passive income could be a full-time job. Fortunately, there is an alternative via real estate investment trusts or REIT stocks They typically focus on income-producing properties like apartments, office buildings, hotels, shopping centers, and other commercial real estate properties.
They are required to pay at least 90% of taxable income to unit holders to avoid corporate income taxes. This means that REITs provide investors with a steady stream of passive income despite turbulence and volatility in the market. Many REITs pay high distributions, often monthly. This can make them an excellent alternative to securities such as dividend stocks, equities, mutual funds, or even corporate bonds for investors in a volatile market in 2023. The payout ratio and capital gains make REITs profitable for stock market players.
4 Top REIT Stocks for 2023
Best 4 Top REIT Stocks to Buy for 2023
American Tower Corporation
Some of the most vital pieces of US infrastructure are the cell towers and data centers that power communications networks. American Tower Corporation is a significant contender in owning a share of these properties and benefiting from their lease income.
The company has a portfolio of around 223,000 communication towers and is adding more to its list. The company also currently sports a market capitalization of over $100 billion. Additionally, the usage of network systems has increased and is going to be in a boom soon. Shares of this REIT have fallen 7.5% in the last year. However, with 5G expected to take over the telecom sector, there will be more demand for diversification and expansion of cell towers. This is AMT’s key strength. Market growth for AMT is inevitable.
The numbers also look great when it comes to dividend payments. It pays a dividend of $6.24 per share, which is a yield of 2.9%. The company also has a 5-year dividend growth rate of 17%, making it a rare earnings growth REIT.
Crown Castle International
Crown Castle International also trades in the telecommunications sector. It has over 40,000 cell towers and 80,000 route miles of fiber assets crucial to supporting 5G networks.
Though Crown Castle competes with many telecommunication giants, its investments over the past decades have made its company growth strategy very clear. Crown Castle has spent $20 billion on tower and fiber acquisitions. It has also invested $11 billion to build additional towers and fiber assets. The company sees another decade-long investment cycle ahead as its customers develop next-generation wireless networks such as 5G.
The REIT reported fourth-quarter earnings for 2022, highlighted by nearly 6.5% organic revenue growth in its Towers segment and more than 9% dividend per share growth, making it a superior choice for the keepers of growth stocks. The company said, “Site rental revenues grew 10%, or $570 million, from the full year 2021 to the full year 2022, inclusive of approximately $258 million in Organic Contribution to Site Rental Billings, a $299 million increase in straight-lined revenues.”
When the REIT announced its Q3 earnings, CEO Jay Brown said that the REIT was on course to increase dividend payouts by 7% a year, adding up to the total return it offers to its shareholders.. Since 2017, Crown Castle has increased distribution growth at an annualized rate of 9%. The REIT currently yields 4.7%. With such good figures, Crown Castle International becomes a must-buy for a strategic investor.
Digital Realty Trust
Digital Realty Trust is primarily a publicly traded data center company. This REIT leases space in its roughly 300 facilities to more than 4,000 customers. Medical companies, insurance companies, streaming services, and defense contractors use Digital Realty to securely store and process digital information.
With digitization in its booming era and new technologies being introduced yearly, demand for infrastructure likes is inevitably growing. Despite the competition and fear of deceit of information, the robust data storage network makes Digital Realty Trust a promised name among its customers locally as well as on an international level.
The REIT reported its earnings for Q3 2022, and revenues came in at $1.2 billion, a 5% increase from the previous quarter and a 5% increase from the same quarter last year.
Net income came in at $239 million or $0.75 per diluted share, compared to $0.44 in the same quarter last year.
Recently, it acquired a South African-based data center operator Teraco, which will further help expand its operations in Africa and thereby grow multiple interconnections.
Its share price shows a downward rally when it comes to market activity and is down by over 18% in the last year. This could be a contrarian bet for the brave investor.
Equinix Incorporation
Data center REITs have become increasingly popular due to the rising dependency on data and the Internet for almost everything. Like Digital Realty Trust, Equinix Inc. is the other publicly traded data center company.
As one of the world’s largest owners of data center properties, it has benefitted significantly from the innovation and financing in the cloud computing industry. As the pandemic hit the earth and citizens were locked inside their houses, the demand for the Internet surged, and companies like Equinix Inc. benefitted as their data services grew faster. Founded in 1998 as a Silicon Valley start-up, it has grown into a vital data center REIT by market cap and owns an interest in 237 facilities across 27 countries on five continents.
Its global reach and phenomenal portfolio explain some of its allure for investors, and the company’s performance shines bright, indicating inconceivable growth and expansion. With a share price of nearly $750 per share and an annual return of 5.08%, this company can provide sweet gains to its investors.
Conclusion
Infrastructure is indispensable in any economy, and with the rapidly growing data networks and digitization, the importance of REITs is becoming crucial to the global economy. Increasing demand for network storage and diversified need for data processing centers provides REITs with a steady realty income and ample opportunities to diversify their operations. Moreover, REITs are becoming popular because of their continuous yield returns and cash flows. REITs continue to fund stable dividends for their shareholders, providing them with a sense of security which is rare in market instruments considering the market volatility. Thus, REITs are an excellent avenue for investment and must be a part of everyone’s investment portfolio because they might be the back-benchers in delivering eye-popping high yields. Still, these are absolute winners in the case of consistency and reliability.
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