"Best" is a subjective term. Like, deep dish pizza is the best. Or sunrises in Hawaii are the best. Or my dog is the best. (OK, that's not so subjective.)
The same is true when it comes to investing, at least when it comes to picking real estate stocks -- our specialty at Millionacres -- that we think will be the best in the future, "future" here defined as everything from the moment you buy them going forward. It's easy to look back and choose criteria and rate by those, but looking forward? Not so much.
But we're going to sally forth anyway. For this exercise, we're going to choose the three best real estate investment trusts (REITs) to buy in August, based here on the idea they'll be buy-and-holds, serving up long-term growth prospects with a side of income.
UDR for multifamily properties
UDR (NYSE: UDR) has been around for more than 45 years and is a residential REIT formerly known as United Dominion Realty Trust and United Dominion Residential Communities.
As of March 31, Colorado-based UDR owned, managed, and/or had an ownership position in 52,617 apartment homes, including 1,417 homes under development. In its June 21 investor presentation, the company valued its operation at $21.3 billion with a portfolio spread across 21 coastal and Sun Belt markets, occupied by tenants with household earnings on average at 150% of their respective market's median income.
UDR also boasts of having paid a dividend for 194 straight quarters and a compound annual growth of 12.2% over the past 20 years, compared with 11.1% over the same period for the NAREIT Apartment Index.
People got to live somewhere, and profitable providers of multifamily options are further benefiting from rising rents as their properties are chosen by tenants who often can't afford or are instead choosing not to buy into a superheated market for home purchases. Of course, this market is highly location-dependent, and UDR seems well-positioned in that regard, too.
UDR stock closed on Friday, July 30, at $55.59, giving it a market cap of about $16.3 billion and a yield of 2.64% based on an annual dividend of $1.45 a share.
Omega Healthcare Investors for long-term senior care
Omega Healthcare Investors (NYSE: OHI) is a Maryland-based healthcare REIT that owns and contracts with 70 operating partners through triple net leases to provide skilled nursing and assisted living services across the United States and in the United Kingdom.
COVID-19 hammered LTC operators like OHI, but the company said things are getting better, reporting recently that, most importantly, the contagion rate within its facilities had dropped by more than 95% since the pandemic's peak, and that it collected more than 99% of its April and May rent. Along with a healthy dividend yield, the company calls itself a growth stock, pointing to growth in annualized adjusted funds from operations (AFFO) of 8.6% since 2004.
Moving along the continuum of care into a skilled nursing facility -- a nursing home -- isn't something people typically want to do; it's something that often has to happen. Being there to provide that service on a large scale is just naturally a growth industry in a nation with a rapidly aging population.
OHI stock closed at $36.28 on Friday, July 30, giving it a market cap of about $8.5 billion and a yield of 7.39% based on annual dividends of $2.68 per share.
Vanguard ETF for wide exposure
OK, we're cheating a bit here: The Vanguard Real Estate ETF (NYSE: VNQ) isn't a REIT. It's an exchange-traded fund (ETF) that currently owns 174 REITs -- here's a list -- in a portfolio weighted to track the benchmark MSCI US IMI Real Estate 25/50 Index.
There's a very similar offering: the Vanguard Real Estate Index Fund Admiral Shares (NASDAQ: VGSLX). Both offer newbie and veteran investors alike the ability to buy the whole megillah when it comes to REITs. They also offer Vanguard's typically low expenses and the benefits and drawbacks (not many strikeouts, nor home runs) of a passive index fund that tracks the industry's fortunes in toto. A major difference is that VGSLX is a mutual fund with a minimum investment of $3,000. VNQ, as an ETF, is investable at the price of a single share.
A share of VNQ stock cost $106.29 at market close on Friday, July 30, good for a market cap of $77 billion and a yield of 2.99% based on a distribution yield of 2.34%.
The Millionacres bottom line
Each of the investment options above should offer a helping of growth with a side of income, based on what they've done, what they're doing, and the industries in which they operate. That's good enough to make them candidates for the best REITs to buy in August.