Diversifying an investment portfolio is important to anyone who doesn't want to lose everything because they have it all tied up in one stock or industry. It's really that simple. After that, it gets more complicated.
How much variety do you need in your portfolio? How many segments should you be in? What about cash? Bonds? Mutual funds? Individual equities?
The answer is different for each investor, and even then, it changes over time. But all along the way, committing cash to land and buildings -- and those who own and manage them -- can be a good way to add balance and stability to investors who want to, well, keep it real.
And that brings us to real estate investment trusts (REITs): entities that own and/or finance income-producing properties while operating as pass-throughs required to pay out at least 90% of their taxable income to their shareholders.
Of course, here at Millionacres, we focus on those 225 or so publicly traded REITs. That's a big group offering lots of opportunities for sector diversification. Here's a quick look at three of these real estate stocks that deserve serious consideration.
If the idea that e-commerce will continue to deepen its domination of retail activity in the U.S. seems investable to you, then consider Duke Realty (NYSE: DRE) a must-have.
The Indianapolis-based firm is the largest domestic-only logistics REIT, with full or partial ownership of 543 properties encompassing 162 million square feet in key coastal ports and inland logistics nodes in 19 major markets.
In the S&P 500 and publicly traded since 1993, Duke Realty is also on a roll, reporting record rent growth and occupancy in Q2 2021. This is in addition to significant growth in funds from operations (FFO) and net income, the launch of five spec projects -- and plans to invest in more in coming months -- and $260 million in acquisitions during the quarter.
Duke Realty stock closed at $50.88 on Friday, July 30, close to its 52-week high of $51.68 and well off its 52-week low of $35.37. That's good for a market cap of about $19.1 billion and a yield of 2.0% based on an annualized dividend of $1.02 that has seen six consecutive years of increases.
Kimco Realty Corp. (NYSE: KIM) is one of the nation's largest publicly traded owners and operators of open-air, grocery-anchored shopping centers and mixed-use assets. That commitment to tenants in essential businesses -- along with its focus on first-ring suburbs, especially in costly coastal and fast-growing Sun Belt markets -- helps make this commercial real estate specialist a buy.
Longevity and experience also are a plus. Based in Jericho, New York, Kimco has been in business for more than 60 years, publicly traded on the NYSE since 1991, and is in the S&P 500. As of June 30, its portfolio included ownership interests in 398 U.S. shopping centers and mixed-use assets comprising 70 million square feet of gross leasable space.
Kimco stock closed at $21.33 on Friday, July 30, about 4.4% off its 52-week high of $22.31 but more than double its 52-week low of $10.03. That's good for a market cap of about $9.2 billion and a yield of 2.83% based on a payout of $0.60 in the past 12 months. (The latest payout is $0.17 per share for Q2 2021. Last year, the company skipped Q2's payout after paying $0.28 per share in Q1 2020 and then restoring it at $0.10 in Q3 2020.)
Innovative Industrial Properties
Innovative Industrial Properties (NYSE: IIPR) is, by far, the baby of this bunch -- but don't throw it out with the bathwater. In the five years since its launch, this specialist in leaseback and financing arrangements for medical marijuana growers has established a record of performance and a promise for more.
As of July 6, the company said it owned 72 properties in 18 states, including four it had bought just since April. That's about 6.6 million rentable square feet (including about 2.2 million under development/redevelopment), all 100% leased with a remaining weighted-average lease term of approximately 16.7 years.
IIPR was the first public company to focus on owning such facilities, and this industrial REIT's position as a rare provider of capital to a fast-growing industry starving for funding (and expected to remain that way until the feds legalize the stuff) has served it and investors well.
In December 2016, IIP went public at $20 a share. Its stock closed at $214.99 on Friday, July 30, about 3% below its 52-week high of $222.08 and more than double its 52-week low of $101.78. That's good for a market cap of about $5.1 billion and a yield of 2.39% based on a payout of $5.13 per share over the past 12 months. That payout has increased each of the past three years.
The Millionacres bottom line
There are higher-yielding REITs, to be sure. Still, Duke Realty, Kimco, and Innovative Industrial Properties each have established strong records and portfolios that make them hardy candidates as real estate investments in a balanced portfolio.