At the time of this writing, Hurricane Ida is winding up to deal what could be a devastating blow to the very part of the Gulf Coast that was ravaged by Hurricane Katrina 16 years earlier on the same day.
And tropical weather isn't the only rough sailing the American economy is facing right now. The biggest worry, of course, is the devastating resurgence of COVID-19 and what that might mean to the reopening of offices, retail shops, and schools. And then, there's inflation and its potential impact on consumer spending, interest rates -- you name it.
So, in all this uncertainty, it seems like a good time to consider the relative stability of real estate investment trusts (REITs) for your portfolio. But not just any. During these financial storms, bigger may be better, but the right segment matters, too.
So, assigned to choose three of these dividend-paying real estate stocks to recommend as September buy considerations, I looked at the biggest players in what seems like inflation-resistant verticals that have already shown their resilience not just throughout the pandemic but even long before that.
Three stood out: Equity Residential (NYSE: EQR) among residential REITs, Prologis (NYSE: PLD) among industrial REITs, and American Tower (NYSE: AMT) among infrastructure REITs.
Equity Residential, also known as Equity Apartments, buys, develops, and manages rental apartment properties mostly in and around Boston, New York, Washington, D.C., Southern California (including Los Angeles, Orange County, and San Diego), San Francisco, Seattle, and Denver.
The Chicago-based company has a market cap of about $31 billion and owns 303 properties located in nine states and the District of Columbia and consisting of 78,107 apartment units. In Equity Residential's second-quarter 2021 earnings report, president and CEO Mark Parrell said that the reopening of cities "has driven pricing and physical occupancy up so quickly that they now equal or exceed 2019 levels in most of our markets."
Chicago-based Equity Residential also is repositioning its portfolio into hotter markets. In Q2 2021, the REIT spent about $645.7 million for seven properties with 1,894 apartment units in Denver; Atlanta; suburban Boston; Fairfax, Virginia; and Austin, Texas. It sold six properties with 866 units for $434.8 million in the Los Angeles, San Francisco, Seattle, and New York City markets.
Our Matthew DiLallo takes a deeper look at this strategy in this Aug. 5 piece: "Equity Residential Continues to Expand Beyond the Coasts."
Equity Residential stock closed at $83.35 on Friday, Aug. 27 -- 2.89% below its 52-week high of $85.83 from July 28 and 83.47% above its 52-week low of $45.43 from last Oct. 29. That's good for a yield of 2.89% based on an annual dividend of $2.41 per share.
With a market cap of about $130 billion -- the largest among REITs -- and a growing global presence, American Tower stands tall among providers of essential infrastructure to the vast, uber-essential telecommunications industry.
Boston-based American Tower develops, owns, and operates more than 214,000 communications sites, including more than 43,000 in the United States and Canada and more than 171,000 properties internationally.
During Q2 2021, American Tower added nearly 27,000 sites -- primarily in Germany, Spain, and Latin America -- through its acquisition of Telxius Towers and reported year-over-year jumps in total revenue of 20.2% and consolidated adjusted funds from operations (AFFO) of 18.7%.
And they expect to build on their dominant position.
"Looking forward, we expect to leverage the competitive advantage provided by our scaled, diversified portfolio of more than 214,000 communications sites to drive sustainable long-term growth and attractive returns, capitalize on new opportunities associated with 5G, and execute our vision of making wireless communication possible everywhere," American Tower CEO Tom Bartlett said in the company's Q2 2021 earnings press release.
American Tower stock closed at $285.50 on Friday, Aug. 27 -- 2.17% below its 52-week high of $291.82 from Aug. 20 and 44.56% above its 52-week low of $197.50 from March 8. That's good for a yield of 1.78% based on an annual dividend of $5.08 per share.
Prologis is big. Besides a market cap of $97.1 billion, it has about $169 billion in assets under management, with 995 million square feet of space serving about 5,500 customers in 19 countries primarily engaged in business-to-business and retail online fulfillment.
In the U.S. alone, the REIT owns 618 million square feet in 3,310 buildings on 4,095 acres -- that's 6.4 square miles of warehouse space. The company's roster of top 10 customers includes heavyweights such as Amazon, FedEx, Home Depot, UPS, and DHL.
San Francisco-based Prologis spent about $128 million in new acquisitions in Q2 2021 and sees more growth ahead in its bottom line.
"Demand for logistics space is robust and diverse, and operating conditions remain the healthiest in our 38-year history. Vacancies in our markets are at all-time lows, contributing to record rent growth and valuation increases," Prologis chairman and CEO Hamid Moghadam said in the Q2 2021 earnings press release.
Prologis stock closed at $131.31 on Friday, Aug. 27 -- 2.52% below its 52-week high of $134.70 from Aug. 23 and 29.11% above its 52-week low of $93.08 from Jan. 12. That's good for a yield of 1.92% based on an annual dividend of $2.52 per share.
The Millionacres bottom line
These stocks may not be too big to stumble -- they swooned with the rest of the market during the first wave of the pandemic -- but they do seem too big to fail. Very large positions in inflation-resistant verticals, strategic investments in their own portfolios, and long records of performance make each of them a good candidate for the best REIT to buy in September.