The stock market has been hammered this year. While we are likely to continue to see bear market rallies like Wednesday, the reality is that the sell-off will resume and likely continue until rate hikes are concluded. The huge 75-basis-point increase Wednesday may be followed by another next month. The Federal Reserve is so far behind the curve that it literally may have to take out the interest rate bazooka over the next six months to stem the spiraling inflation that is crippling consumers.
In a recent tweet, Tesla founder Elon Musk spoke about owning tangible items as investments. While the rare art and expensive wine that he cited are probably not the ticket for average investors, buying real estate does make sense. It is the ultimate tangible item. As the saying goes, they aren’t making any more land.
Some real estate investment trusts (REITs) can be sensitive to rising interest rates, but there are sectors in that arena, as Benzinga noted in a story on Musk and his investment thoughts: “While Musk referenced owning a home, real estate, in general, performs well for investors during years of high inflation. Specifically, single-family homes, multifamily, self-storage and farmland.”
We focused on the top apartment and self-storage REITs, especially apartments where rents are soaring and people once looking to buy homes are reconsidering and backing away due to the jump in mortgage rates. We found seven stocks that have been hammered during the recent market decline and that all pay solid dividends and are Buy rated at major Wall Street firms. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
AvalonBay Communities (NYSE: AVB) develops, acquires and manages high-quality apartment communities. As of December 31, 2020, it owned or held a direct or indirect ownership interest in 291 apartment communities containing 86,025 apartment homes in 11 states and the District of Columbia, with 18 of those communities under development and one under redevelopment.
This equity REIT focuses on apartment communities in leading metropolitan areas in New England, the New York/New Jersey metro area, the Mid-Atlantic, the Pacific Northwest, and northern and southern California. The company’s expansion markets include southeast Florida and Denver, Colorado.
The company recently reported a very solid 13% increase in same-store residential rental revenues for the two months that ended May 31, 2022, compared with the prior-year period. That was almost 2% higher than the company’s most recent expectation. In addition to better-than-expected occupancy and effective lease rates, the upside was driven by favorable underlying resident uncollectible lease revenues and the recognition of higher-than-expected delinquent rent payments from COVID-19 rental assistance programs.
AvalonBay Communities stock investors receive a 3.41% dividend. Morgan Stanley has a $225 target price, but the Wall Street consensus target is even higher at $250.48. The shares closed Wednesday at $187.58.
Camden Property Trust
With rents trending higher, this real estate idea makes sense now for growth and income investors. Camden Property Trust (NYSE: CPT) is a real estate company primarily engaged in the ownership, management, development, redevelopment, acquisition and construction of multifamily apartment communities.
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