3 REITs for Income Investors to Buy Now Amid Coronavirus Worries

Benjamin Rains

U.S. stocks fell Thursday as coronavirus-based worries crop up once again. Apple earlier in the week said it expects to fall short of its quarterly guidance based on a downturn in production and demand in China. Wall Street and investors seem a little more anxious about how China’s setbacks might impact the global economy.

Despite the broader worries, Q4 earnings continue to come in stronger than expected. And with U.S. unemployment near 50-year lows and interest rates low, stocks could continue to climb. Still, investors might want to add some income to their portfolios to help protect against a possible coronavirus pullback.

Real Estate Investment Trusts are a solid place to start. REITs are companies that own, operate, or finance real estate properties that produce income, such as apartment complexes or retail locations.

We should note that instead of earnings, REITs report funds from operations or FFO, but investors can view them as essentially the same for our purposes. Plus, one distinct advantage is that REITs must pay at least 90% of their taxable income in dividends to shareholders.

With this in mind, let’s dive into three highly-ranked REITs that investors might want to buy amid a slight uptick in coronavirus worries…

Prologis, Inc. PLD

Prologis is a logistics-focused REIT that leases distribution facilities mostly to retail/online fulfillment and business-to-business clients. The firm operates in what it calls “high-barrier, high-growth markets” around the world. Prologis boasts more than 5,500 customers and completed its $13 billion, all-stock acquisition of Liberty Property Trust in early February. The deal expands its reach in vital population hubs such as Chicago, Houston, and Southern California.

PLD shares are up 11% in 2020 to easily outpace its industry’s 5% climb and have jumped since it matched our Q4 bottom-line estimates in January. This run is part of a much larger 95% surge over the last three years that has seen Prologis blow by its industry’s 20% expansion. PLD stock hit a new high once again Thursday and its valuation picture is not that stretched compared to where it has traded over the last 12 months.

Prologis’ positive longer-term earnings revisions activity helps it earn a Zacks Rank #2 (Buy) at the moment. PLD’s 2.17% dividend yield comes in well above the 10-year U.S. Treasury note’s 1.52%. And Our Zacks estimates call for PLD’s revenue to jump 34% and 9.3%, respectively in fiscal 2020 and 2021. Lastly, Prologis FFO is expected to pop 12.3% and 5.6% during this same stretch.  

Medical Properties Trust, Inc. MPW

Medical Properties Trust is a REIT that works to offer health-industry operators access to capital to help fund technology upgrades, hiring, facility improvements, and new construction through long-term net leases of real estate assets. And MPW posted strong fiscal 2019 results in early February. “We delivered a market leading 39% return to our shareholders and have now doubled our market capitalization to $11.8 billion to become one of the 30 largest REITs in the market,” CEO Edward Aldag said in prepared remarks.

MPW stock is up 6% since it reported its Q4 results, as part of an extended run that has seen its climb nearly 100% in the last 24 months. Along with its relatively low price at around $25 per share, MPW trades at a solid discount against its industry’s average. And Medical Properties recently raised its quarterly dividend by 4% and its current yield rests at 4.37%, which tops its industry’s 4.03% average.  

MPW earns a Zacks Rank #2 (Buy), based on its strong earnings revision activity. Looking ahead, our current Zacks estimates call for the firm’s 2020 revenue to soar 53% to reach $1.31 billion and another 9.2% in 2021. Its FFO is projected to surge 28% this year and climb again in 2021.

NexPoint Residential Trust, Inc NXRT

NexPoint Residential is an externally advised REIT that operates in the multifamily space, mostly in the Southeast and Texas. The company aims to own and operate properties with well-paying jobs in the area that also have a limited supply of new affordable housing, which it hopes makes them stand out through high-quality “life-style” amenities.

Shares of the Dallas, Texas-based firm have soared 115% during the last two years, compared to its industry’s 50% climb. More recently, NXRT stock is up over 12% in 2020 and it just topped our Q4 bottom-line estimates on Tuesday. NexPoint is a Zacks Rank #2 (Buy) right now and it trades at a discount against its industry.

NexPoint’s full-year adjusted FFO is projected to climb 18% in 2020 on 19.4% stronger revenue. This would come on top of 2019’s 23% sales expansion. And the firm currently pays an annualized dividend of $1.25 a share, for a yield of 2.50%.

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