Goldman Sachs Loves 5 REITs for 2023 That Pay Big, Dependable Dividends

Many investors will be more than happy to see 2022 come to an end, as it has been one of the worst years for stocks since the turn of the century. Rising interest rates have been one of the major headwinds for stocks. Rates once again moved higher Wednesday with another 50-basis-point increase, and they are likely to go higher early next year. It has been especially difficult for real estate investment trusts (REITs), which are vulnerable to rising rates.

The good news is the rate increases are close to being complete, as Wednesday’s hike pushes the federal funds rate to 4.25% to 4.50%. Given that the expected terminal, or final, rate is projected to be at 5.00% to 5.25%, the Federal Reserve seems close to being done, and that bodes well for REITs, especially those of the residential variety.

Five top REITs are rated Buy at Goldman Sachs, and all make sense for income investors looking to get back into a sector that provides consistent and dependable income. The Goldman Sachs team, while remaining cautious, said this in their research report:

We think there are supply headwinds facing the Sunbelt markets, where deliveries are expected to increase significantly in 2023 after record construction activity, and while we do not deny that the demand outlook in the Sunbelt is also more favorable, we think that with overall economic slowdown ahead — beyond just legacy Tech markets given broad-based positive effects of Tech activity in the last couple of years, we are more concerned about supply in these markets.

Despite the concerns over supply, the analysts feel that conditions will improve by 2024, so being selective in 2023 could set up investors for some big total return potential. Despite all five stocks being Buy rated, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

American Homes 4 Rent

As it is trading just above a 52-week low, rising mortgage rates could be a boon for this company as home buyers wait for rates to drop. American Homes 4 Rent (NYSE: AMH) is a leader in the single-family home rental industry, and “American Homes 4 Rent” is fast becoming a nationally recognized brand for rental homes, known for high-quality, good value and tenant satisfaction.

The company is an internally managed Maryland REIT focused on acquiring, developing, renovating, leasing and operating attractive, single-family homes as rental properties. As of September 30, 2020, the company owned 53,229 single-family properties in selected submarkets in 22 states.

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