Revealed on October twenty fourth, 2022 by Samuel Smith
Actual Property Funding Trusts (i.e., “REITs”) are tax-advantaged earnings autos which have grow to be more and more standard with traders and establishments in recent times. The rationale for that is that they don’t have to pay any earnings tax on the company stage, however as an alternative function move by entities.
In trade for this profit, they’re required to satisfy sure pointers, together with paying out no less than 90% of taxable earnings to shareholders within the type of dividends. Consequently, excessive yield and dividend progress traders typically love REITs and dedicate a substantial portion of their portfolios to them.
You possibly can obtain your free 200+ REIT listing (together with vital monetary metrics like dividend yields and payout ratios) by clicking on the hyperlink under:
Definitely, excessive dividend REITs are engaging for dividend traders in search of earnings proper now.
Nevertheless, not all REITs are excessive yielding and actually, a few of them boast spectacular progress monitor data. This makes them a better of each worlds sort funding, the place traders can take pleasure in a quickly rising dividend alongside excessive capital appreciation potential.
On this article, we’ll have a look at seven REITs which have sturdy progress potential for the foreseeable future.
Desk of Contents
#1. Revolutionary Industrial Properties Inc. (IIPR)
IIPR focuses on proudly owning marijuana cultivation and manufacturing properties, the place it offers essential entry to capital for marijuana companies.
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IIPR advantages from being the only real publicly traded REIT of its variety in the US and has loved sturdy progress in consequence. It presently owns effectively over 100 properties throughout 19 states.
Supply: Investor Presentation
Its enterprise mannequin is sort of profitable and offers engaging risk-adjusted returns due to the 15-20 preliminary lease phrases which can be 100% triple internet and usually include sturdy preliminary rental yields and annual escalations.
The REIT has a formidable progress monitor file as its AFFO per share has soared from $0.67 in 2017 to $5.55 in 2021 and an anticipated AFFO per share tally of $8.00 in 2022. Its dividend has additionally grown quickly, rising from $0.55 in 2017 to $5.72 in 2021 and a present annualized payout price of $7.00 per share. NOI has elevated at a whopping 137% CAGR over this time interval whereas economies of scale have improved immensely as mirrored in its G&A as a share of NOI plummeting from 89% in 2017 to a mere 11.5% in 2021.
Transferring ahead, it continues to have an unimaginable progress profile, with the principle constraint being the authorized/regulatory surroundings. The authorized and regulatory uncertainties however, analysts are total nonetheless bullish on IIPR’s potential to proceed rising. They count on the REIT to develop dividends per share at a 6% CAGR by 2024 and FFO per share at a 9.6% CAGR over the identical time span. Nevertheless, if the regulatory surroundings improves quicker than anticipated, IIPR might doubtlessly ship a lot quicker progress than this already sturdy forecast.
#2. Rexford Industrial Realty, Inc. (REXR)
REXR focuses on proudly owning and working industrial properties situated in Southern California. Its portfolio presently consists of almost 42 million sq. toes. The REIT was based in 2001 and has generated very sturdy progress in recent times. Since 2018 it has generated a 32% NOI CAGR and a 15% FFO per share CAGR. Since 2017, its dividend has grown at an 18% CAGR and since 2017 the REIT has generated a 15% whole return CAGR. Over the previous three years, it has posted a 32% consolidated NOI CAGR, a 22% FFO per share CAGR, and a 17% dividend per share CAGR.
Its Q3 numbers got here in very sturdy as effectively, with 98.6% portfolio occupancy, 40.1% consolidated NOI progress, 44.5% core FFO progress, and 16.3% FFO per share progress. In the meantime, its stability sheet stays in stable form, with about $1.2 billion in whole liquidity a BBB+ credit standing from S&P and a mere 15.9% internet debt to whole enterprise worth ratio.
Trying forward, analysts count on REXT to proceed producing sturdy progress numbers. By means of 2026, analysts forecast a 13.2% AFFO per share CAGR, a 12.8% FFO per share CAGR, and a 15.5% dividend per share CAGR.
This bullish outlook is partly as a result of its effectively diversified and high-quality tenant base that ought to result in decrease draw back threat and quite a few progress alternatives.
Supply: Investor Presentation
On high of that, REXR additionally implements a value-add strategy to its asset administration with a purpose to drive superior leasing spreads. Final, however not least, REXR advantages from its singular concentrate on the most important U.S. industrial market and the fourth largest total industrial market on the planet as Southern California has the most important ports within the nation, representing 40% of all U.S. containerized imports.
#3. Independence Realty Belief, Inc. (IRT)
IIRT focuses on multifamily house communities in sunbelt markets. Whereas the REIT was suffering from its decrease high quality asset portfolio and better leverage in its early years after going public in 2013, administration has since then reworked the enterprise. It has acquired quite a few larger high quality house communities, considerably deleveraged the stability sheet, and integrated value-add operations to its instrument equipment with a purpose to enhance returns on funding.
Supply: Investor Presentation
Whereas its previous monitor file has been lower than stellar with FFO per share solely bettering to $0.84 in 2021 relative to its $0.81 quantity in 2013, the ahead outlook for the enterprise is a lot better. FFO and AFFO per share are anticipated to develop at a ten% CAGR by 2026 whereas dividends per share are anticipated to extend at an 11% CAGR over that very same interval.
This sturdy progress will possible be fueled by IRT’s mixture of considerable retained money flows, sturdy same-store NOI progress price, and worth add enterprise, making it some of the intriguing multifamily funding alternatives in the intervening time.
#4. UMH Properties, Inc. (UMH)
UMH focuses on proudly owning manufactured housing communities throughout the US and presently owns tens of hundreds of properties in over 100 communities within the Midwest and Northeast. ‘
Supply: Investor Presentation
For a few years UMH struggled to develop its dividend and FFO per share, with FFO per share rising solely barely on an annualized foundation from 2012 to 2019 (from $0.62 per share in 2012 to $0.63 per share in 2019). Moreover, the annualized dividend per share remained flat at $0.72 the complete time and was typically not lined absolutely by money flows over that interval.
Nevertheless, since 2020 the corporate’s progress engine has lastly kicked into excessive gear. FFO per share elevated from $0.63 in 2019 to $0.87 in 2021 and the dividend per share lastly started to develop together with it. In 2021, UMH paid out $0.76 per share in dividends and is presently paying out a $0.80 annualized dividend.
Transferring ahead, this sturdy progress momentum is predicted to proceed. Wall Road analysts undertaking FFO per share to develop at a 23.3% CAGR by 2024, AFFO per share to develop at a 20.4% CAGR, and the dividend per share to develop at a ~5% CAGR. Whereas the dividend per share progress might definitely be larger than what it’s projected to be, UMH is predicted to retain extra capital with a purpose to gasoline additional profitable progress investments. What this does imply, nevertheless, is that UMH’s mid-single digit dividend CAGR will possible be sustainable for a long-time to return and the speed of progress might even speed up.
#5. SBA Communications Company (SBAC)
SBAC owns and operates wi-fi communications infrastructure akin to tower buildings for wi-fi antennas. Actually, it owns over 36,000 of those towers which it then leases out to wi-fi telecommunications corporations.
The REIT has generated spectacular progress prior to now and has in truth seen it speed up in current quarters because the graphic under illustrates:
Supply: Investor Presentation
In 2012, SBAC generated $3.09 in AFFO per share and didn’t pay a dividend. In 2021, it generated $10.74 per share in AFFO and paid out $2.32 in dividends per share. This yr the REIT is predicted to generate $12.06 in AFFO per share whereas paying out $2.84 per share in dividends.
Transferring ahead, SBAC is predicted to proceed its unimaginable progress momentum. Dividends per share are anticipated to develop at a 21.1% CAGR by 2026 whereas AFFO per share is predicted to develop at an 11.2% CAGR over the identical time interval. Consequently, SBAC is among the most engaging progress REITs out there at present.
#6. Welltower Inc. (WELL)
WELL is a healthcare REIT that focuses on Senior Housing Operations, Senior Housing Triple-net, Outpatient Medical, Well being System, and Lengthy-Time period/Submit-Acute Care. Its earnings is pretty effectively diversified throughout these segments, with its 2021 internet working earnings damaged down as following: 39.3% in Seniors Housing Working (“SHO”), 23.5% in Seniors Housing Triple-net, 23.2% in Outpatient Medical (“OM”), 8.8% in Well being System, and 5.2% in Lengthy-Time period / Submit-Acute Care.
WELL’s monitor file over the previous decade is lower than spectacular provided that its FFO per share and dividend per share have really declined barely over that interval. In 2012, FFO per share was $3.52 and dividends per share had been $2.96. In 2021, FFO per share was $3.21 and dividend per share had been $2.44.
Nevertheless, shifting ahead, analysts count on WELL’s progress trajectory to select up significantly, making it a compelling progress story. By means of 2026 WELL is predicted to develop its dividend per share at a 12% CAGR, its FFO per share at an 11.6% CAGR, and its AFFO per share at a 13.2% CAGR.
The elements behind this progress are the truth that the U.S. 80+ yr outdated inhabitants is predicted to see its annualized progress price enhance from 1.7% over the previous decade to 4.4% within the coming decade. The senior housing internet stock progress price has plummeted in recent times from 3.8% in 2017 to 1.5% this yr.
In the meantime, the huge buildup in home-owner fairness and inventory market returns over the previous a number of a long time implies that aged people seeking to extra to senior housing can rather more simply afford it.
Supply: Investor Presentation
Consequently, administration expects its occupancy price and its pricing energy to soar within the coming years, boosting money flows and dividend progress together with it.
#7. Important Properties Belief (EPRT)
EPRT is a triple internet lease REIT with focuses on single-tenant properties leased out to center market corporations that function service-oriented or experience-based companies akin to eating places, automotive washes, automotive and medical companies, comfort shops, health facilities, and early childhood schooling. It has a well-diversified portfolio of over 1,500 properties unfold throughout 16 industries.
One in every of its greatest focuses is to buy properties that may simply be repurposed and launched to a special tenant within the occasion that certainly one of its present tenants defaults on their lease. Consequently, its enterprise mannequin is sort of low threat, particularly when mixed with its triple internet lease construction.
Supply: Investor Presentation
EPRT went public not too long ago (2018) however has already compiled a formidable monitor file for producing sturdy progress alongside paying out a sexy dividend. In 2018, EPRT generated $0.78 in AFFO per share and paid out $0.43 in dividends per share. In 2021, it generated $1.34 in AFFO per share and paid out $0.98 in dividends per share. This yr, EPRT is predicted to proceed its spectacular progress momentum by producing $1.53 in AFFO per share whereas paying out $1.08 in in dividends per share.
By means of 2026, it’s anticipated to generate a ~6% AFFO per share CAGR alongside a dividend per share CAGR of ~5%. Whereas these numbers usually are not fairly as spectacular as among the others on this listing, its recession resistance, predictable and scalable progress technique, and present dividend yield of over 5.5% make it a compelling dividend progress REIT.
Conclusion
Whereas REITs usually are not usually identified – nor bought – for his or her progress however slightly as passive earnings machines, there are exceptions on the market. One of many beauties of shopping for excessive progress REITs like those mentioned on this article is that traders can obtain great tax-advantaged compounding. Since REITs don’t pay company earnings taxes, taxes are solely paid by traders on the dividends that they obtain.
Consequently, high-growth REITs that retain a substantial share of money flows and might reinvest it at excessive returns get an added enhance since continued progress in earnings on the REIT stage is tax free.
At a time when many growth-oriented investments just like the REITs shared on this article have been overwhelmed down by rising rates of interest, now might be a great time to put money into these thrilling wealth compounders and dividend progress machines.
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