The more Wall Street says that the bond proxies like real estate investment trusts (REITs) and utilities are overbought, the higher they seem to go. Oh sure they will sell off some, but the bottom line is that interest rates are going nowhere, and even if the Federal Reserve raises twice more this year, the fed funds rate would still be only 75 basis points, or three-quarters of 1%.

In a new research report, while Oppenheimer stays overweight the top REITs, the analysts do note that their bullish call is dependent on the relative continued health of the economy, and any slippage to recession could change everything. However, data have been good lately and the economy continues to add jobs. While REIT valuations are not compelling either way at current levels, they make sense for investors looking for some growth and income.

Oppenheimer has 12 companies rated Outperform. We screened for the four with the highest distributions. Remember, REIT distributions may contain return of principal.

Preferred Apartment Communities

This REIT has outstanding distributions and solid growth potential too. Preferred Apartment Communities Inc. (NYSE: APTS) was formed primarily to acquire and operate multifamily properties in select targeted markets throughout the United States. Part of the company’s business strategy is to enter into forward purchase contracts or purchase options for to-be-built multifamily communities and to may make real estate related loans, provide deposit arrangements or provide performance assurances, as may be necessary or appropriate, in connection with the construction of those communities and other properties.

As a secondary strategy, the company also may acquire or originate senior mortgage loans, subordinate loans or mezzanine debt secured by interests in multifamily properties, membership or partnership interests in multifamily properties and other multifamily related assets.

It may invest not more than 20% of its assets in other real estate related investments such as grocery-anchored shopping centers, senior mortgage loans, subordinate loans or mezzanine debt secured by interests in grocery-anchored shopping centers, membership or partnership interests in grocery-anchored shopping centers and other grocery-anchored shopping center related assets.

Shareholders are paid an outstanding 6.16% distribution. The Oppenheimer price target for the stock is $14, and the Thomson/First Call consensus target is set at $13.39. Shares closed trading on Friday at $12.49 apiece.
Bluerock Residential Growth REIT

This is the highest yielding of the Oppenheimer picks, and it is more suited perhaps for aggressive income accounts. Bluerock Residential Growth REIT Inc. (NYSE: BRG) is an REIT that focuses on acquiring a diversified portfolio of Class A institutional-quality apartment properties in demographically attractive growth markets to appeal to the renter by choice. The company’s objective is to generate value through off-market/relationship-based transactions and, at the asset level, through improvements to operations and properties.

Bluerock generally invests with strategic regional partners, including some of the best-regarded, private owner-operators in the United States, making it possible to operate as a local sharpshooter in each of its markets while enhancing off-market sourcing capabilities. The company is included in the Russell 2000 and Russell 3000 indexes.

Investors in this REIT are paid a whopping 10.84% distribution. The Oppenheimer price objective is $16, above the consensus target that is posted at $14.13. The stock closed Friday a $10.70 per share.

Healthcare Trust of America

This top REIT is one of the highly rated companies that serve the medical community. Healthcare Trust of America Inc. (NYSE; HTA) acquires, owns and operates medical office buildings. Since its formation in 2006, the company has invested $3.6 billion in medical office buildings and other health care assets, comprising 15.5 million square feet across 28 states.

The company invests in key markets with above-average growth and health care infrastructure that are capable of servicing long-term patient demand. Within each key market, the company focuses on acquiring medical office buildings on health system campuses, in community-core locations or near university medical centers. The portfolio consists of medical office buildings that are core-critical, a key part of the integrated delivery of health care, and that continue to complement the institutional asset management and leasing platform.

Healthcare Trust investors receive a solid 4% distribution. The Oppenheimer price target is posted at $31. The consensus price objective $29, but note that shares closed above that last Friday at $29.51.

Spirit Realty Capital

This is another higher yielding REIT that makes good sense for growth and income accounts. Spirit Realty Capital Inc. (NYSE: SRC) invests in and manages a portfolio primarily of single-tenant, operationally essential real estate assets throughout the United States.

Single-tenant, operationally essential real estate generally refers to free-standing, commercial real estate facilities in which the tenants conduct business activities that are essential to the generation of their sales and profits. The company’s properties are frequently acquired through strategic sale-leaseback transactions and are predominantly leased on a long-term, triple-net basis to high-quality tenants.

The investors Spirit Realty Capital are paid a juicy 6.21% distribution. The Oppenheimer price objective is $12, while the consensus target price is lower at $11.39. Shares ended last week at $11.27 apiece.

Investors do need to heed the Oppenheimer warning that fundamentals could change fast if the economy heads downward. With that caveat in mind, these REITs all make good sense for more aggressive accounts looking for total return.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.