Top REITs for August 2022

If you don't want the headaches that come with owning physical real estate sector, the next best thing would be to invest in real estate investment trusts also known simply as REITs. These allow you to invest in the real estate market and collect a passive paycheck just as you would invest in any other dividend stock.

And in today's article, I'm going to share with you four real estate company where you can invest in the long term. of what I think these are the most discounted REITs to add to your portfolio right now.

now analyzing REITs is a little bit different than your standard dividend stock like Coca-Cola or Microsoft in the sense that there are different metrics that we use to evaluate them as potential investments. 

For example, with normal dividend stocks, we might look at the PE ratio to help us determine a stock's affordability compared to REITs. We would look at the price of funds from the operation or the P/FFO. With normal dividend stocks, we measure the free cash flow which is what they use to pay the dividend. 

However, with REITs, we will be looking at the adjusted funds from operations or the A/FFO and lastly, with normal stocks, we look at a payout ratio to help us determine how much of a company's earnings they are putting towards the dividend but with real estate investment trusts with REITs, we will be using the FFO power ratio so very similar.

#Number 1

The first REIT we're going to be talking about today is the Medical Properties Trust ($MPW), Which is a company that owns and develops hospital facilities. And currently, they have a portfolio of 447 different facilities across 32 states here in the US, seven European countries Australia, and South America, and MPW has not had a great year just in 2022, they're down about 32.8%. 

And they're starting to kind of tickle that 52-week low there. The P/FFO is in the single digits 8.8, which is incredibly cheap. In fact, it is about 43% lower than this company's five-year average P/FFO so MPW has really come down a lot in share price. But, MPW is still a growing company.

If we see their income statement, the total revenues for this company is going up and if look at the adjusted funds from the operation that FFO, we will see that the same is true here they have a growing amount of funds that they can distribute for the dividend. And the FFO payout ratio is starting to decrease over time. 

So, this is now about 67%. It was up in the 80s, then it came down into the 70s. And now it's down into the upper 60s. So over time this payout ratio is starting to go down, which is great, a declining FFO payout ratio will help us investors feel better about investing in this company because they're not distributing all of their fun from operation to their dividend. 

They're leaving some in the tank which does add to the dividend safety. And if we look at the company's dividend stats, we can see that they have a really high starting yield of 7.25% Which is pretty normal with a lot of real estate investment trusts seeing as they have to pay out.

I believe something like 90% of their income to shareholders in the form of dividends to receive the tax benefits that they do from being the type of entity that they are the five-year growth rate on the dividend is on the lower side just under 4% But we have a higher starting yield. 

So there is a trade-off there. And last but not least they have seven consecutive years of dividend growth. So there is some history of dividend growth.

#Number 2

The next real estate investment trust I want to talk about this one is one that's actually sitting on my watch list we're talking about Simon Property Group ($SPG), which is a REIT that owns and develops upscale shopping, dining, and entertainment destinations across the world with some of their most notable properties.

Including the Galleria in Houston, sawgrass mills in Miami, and my favorite the forum shops at Caesar's Palace in Las Vegas. If we look at this company's share price performance, like MPW they have not had a great year. So far, they're down about 34% year to date. 

And in the last month, they're actually rebounding a little bit. They're up nearly 13% In the last 30 days, which kind of makes me think I probably should have pulled the trigger on it about a month or so ago. But at any rate, despite this climb and share price in the last month. The P/FFO is still in the single digits. So it's still looking incredibly cheap with a P/FFO of 9.07.

And that's about 40.56% lower than this company's five-year average P/FFO now with MPW we saw a lot of top line a lot of revenue growth from that company and it's looking a little bit flatter with Simon Property Group. I'm not gonna lie we can see that 2020 was kind of a down year for them. They're starting to rebound in 2021 and in 2022 they're off to a good start.

I mean, the trailing 12 months is higher than what they did in all throughout 2021 So at least that's good. But the A/FFO right here is increasing, which is what we care about, because this is what they use to pay the dividend. All in all, as far as SPGs financials go, although we did see somewhat flat revenue growth, definitely not trending super up the A/FFO looked to be in a really good spot.

And SPG actually is reporting really strong guidance for the rest of the year, they just recently put out an earnings report where they beat both on earnings and on revenue and actually raised their guidance for the full year 2022. So there is still some growth coming from this company.

If we looked over the dividend, we can see that just like with the first stock, this has a really high starting yield of 6.62% pretty unbelievable and you know, disregard the payout ratio, the five-year growth rate is also on the lower end, which makes sense because we have that higher starting yield. 

#Number 3

The third company we're going to discuss is Kilroy Realty Corp ($KRC), which is a stock that I also just added to my watch list. I actually added this to my watch list after doing my research for this article, this looks like a really solid read. And for those of you who have never heard of it, this company has a portfolio of sustainably built residential and commercial real estate.

And they have a major presence here in California here in my neck of the woods with most of their properties located in San Diego, Los Angeles, and the San Francisco Bay area. Now like the other two stocks we've talked about today, KRC is down quite a bit year to date, they're down 25%. And then in the last month, they're down just a little bit more down 1.4% Basically in the last 30 days.

And this is the first stock with a double-digit P/FFO but it's still looking really solid at 11.22 which is about 26% lower than the company's five-year average P/FFO. Now just based on the financials, if we're comparing this to SPG I really wanna say I see a lot more. 

I mean, if we look at the revenue growth, it's definitely trending up then if we look at the A/FFO it's going to be this a similar story trending up with a much more aggressive rate, both at a much more aggressive rate than what we saw with SPG. And then the FFO payout ratio is in a great spot as well, it seems to hover between maybe about 45 or 55%, somewhere in there. 

Now as far as the dividend stocks go, these are looking pretty sweet as well. If we go over the dividend, the starting yield is a little bit lower than the other two, which is totally fine 4.07% In my book is still a pretty high yield. The five-year growth rate also is the highest that we've seen all day pretty moderate five-year growth rate just above 6%. 

And they do have somewhat of a dividend growth history, six years of consecutive growth. And if we go over to the dividend History we can see that they have quite a substantially longer history of just paying the dividends with 24 years of making consecutive dividend payments. 

#Number 4

We are now at the last stock of the day, we are talking about Store Capital Corp ($STOR), which is a company that's in Warren Buffett's portfolio actually back in 2017, he invested $377 million into this Real Estate Investment Trust, which owns over 2500 single tenant properties across the United States. 

This is actually how this company got its name STORE stands for single tenant operational real estate, which is funny because I thought the essence store stood for super cheap, which I think is what this real estate investment trust is I mean Year to date, it's down 20%, about 20%. 

And then in the last month, I've also seen a little bit of a rebound like Simon property group up about 5.8% In the last 30 days, but the P/FFO was still not looking too bad. It's the highest out of all the companies we've seen. But 12.8 for the P/FFO is not terrible. In fact, this is still about 15% lower than the company's five-year average. 

So I would consider this to be at least at a relative discount compared to where this company historically has sat in the last five years. Now getting into the financials, this one is also seeing some really aggressive top-line revenue growth trending up. And if we look at the A/FFO this is looking great as well seeing some really steady growth there.

If we look at the FFO Payout Ratio we can see this is a little bit higher in comparison to some of the other companies we've seen. Which is a 65 to 75% range on average, but there isn't much variation here. So it does seem to have within this range pretty consistently. So I guess that's okay. 

If we go over to the dividend stats, the forward dividend yield is also on the higher end 5.51%. Not too shabby. The five-year growth rate is right in line with the Forward yield as well 5.83% for the five-year growth rate,

which is not bad, pretty moderate, and they have six years of consecutive dividend growth. And looking at the dividend history, we can see that they've been making consecutive payments for the same amount of time.