10 Inflation-Busting Big-Dividend REITs Can Thrive as Interest Rates Shoot Higher

An adage among real estate investors basically says that you cannot build any more land. While you can always build higher, you still need the land. One of the best assets that most investors are underweighted on is real estate. Those who own a home are technically real estate investors, but home ownership does not produce any income, unless you have rental homes, which can be very capital intensive, not to mention time-consuming.

The inflation conditions this year are the worst since the early 1980s, and there is no reason to expect things will improve any time soon. In fact, according to the National Federation of Independent Business, about 40% of U.S. small businesses intend to raise prices by 10% or more this year. Add in spiraling food and gasoline prices, and the picture for the rest of 2022 looks increasingly grim.

Many investors are concerned that real estate investment trusts (REITs) will get hit hard in a rising interest rate environment, which has begun in earnest as the Federal Reserve raised the federal funds rate by 50 basis points, and similar or even bigger hikes are expected in June and July, as well as the rest of the year.

The reality is REITs have performed well. In a recent publication, the National Association of Real Estate Investment Trusts had this to say:

Historically, REITs have performed well during periods of rising long-term interest rates with average four-quarter return in periods with rising rates of 16.55% compared to 10.68% in non-rising rate periods from the first quarter of 1992 to the fourth quarter of 2021. Additionally, REITs outperformed the S&P 500 in half of the periods when Treasury yields were rising. The positive association that has historically been observed between periods of rising rates and REIT returns is consistent with an improvement in the underlying fundamentals.

We screened our 24/7 Wall St. REIT research universe and found 10 top companies that are all Buy-rated on Wall Street and pay very secure and big dividends. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Getty Realty

Despite climate change concerns, people still need gasoline for their cars, trucks and vans, and gas stations still provide that basic need. Getty Realty Corp. (NYSE: GTY) is a publicly traded net lease REIT specializing in the acquisition, financing and development of convenience, automotive and other single-tenant retail real estate. As of March 31, 2022, the company’s portfolio included 1,014 properties in 38 states and the District of Columbia.

With big footprints in both Texas and California, the company serves some of the most populated regions of the country. Last week, it posted strong first-quarter results with funds from operations that surpassed Wall Street expectations.

Shareholders receive a 6.15% distribution. Baird’s $34 target price compares with a $33.75 consensus target and the most recent close at $26.67 a share.

Gladstone Commercial

This stock has been hit hard as interest rates charged higher and is offering the best entry point since last November. Gladstone Commercial Corp. (NASDAQ: GOOD) is focused on acquiring, owning and operating net leased industrial and office properties across the United States.

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