3 REITs to Buy Today

Real estate investment trusts (REITs) have a lot of appeal, especially for certain kinds of income investors. But finding the right one can be a challenge, since there are more than 200 REITs in the U.S. public markets. Not only is finding the right one important, it's also important to find your REIT at the right price.

Here are three well managed, relatively inexpensive REITs that offer attractive dividends -- all candidates to buy today.

Image source: Getty Images.

The table below uses each company's guidance on funds from operations (FFO), the typical measure of a REIT's cash flow. 

Data source: Capital IQ and author's calculations.

W.P. Carey

W.P. Carey owns single-tenant commercial real estate, which it leases to the industrial, office, retail, and warehouse sectors. Its nearly 900 properties are spread across 17 countries. Approximately 68% of its rent is derived from North America, while the remainder comes from Europe, giving the company a well-diversified portfolio. Carey's leases tend to be long term (think 10 years or longer), and they typically build in rent escalators so rents continue to rise over time.

Why is this stock trading cheaply? W.P. Carey's well-diversified portfolio might actually be hurting it, at least in terms of valuation. Investors like pure plays on a given sector -- industrial, office, or retail, for example -- rather than the mishmash that is Carey's portfolio. And long-term leases are not the market's favorite right now as interest rates rise, putting pressure on long-dated cash flows like contractual rents.

That said, the stock is cheap and diversification actually helps it, from an operating standpoint. Dividend hounds might also like the fact that the company typically bumps its dividend every quarter, often by a penny or half-penny, so the payouts keep moving up quarter by quarter (or penny by penny, as it were).

Annaly Capital

With a market cap of $13 billion, Annaly is the behemoth in the mortgage REIT space -- and that's a beast of a different stripe than the two equity REITs on this list. Mortgage REITs own the debt, such as mortgages, and then collect the payments, unlike traditional REITs, which own and operate property and collect rent. It's for this reason that Annaly is valued against book value rather than on funds from operations, like traditional REITs. On that basis, Annaly looks like a fine acquisition.

When buying mortgage REITs, focus on buying below tangible book value and selling when the stock goes to, say, 105% to 110%. Now trading at 99% of tangible book value, Annaly meets that basic criterion, and you'll receive a nearly 12% yield while you wait. If the stock drops to 95% of tangible book value, it's likely an even better buy. But while that dividend is luscious, don't overweight this stock.

It's important not to have too much exposure to mortgage REITs in your portfolio because they operate with substantial leverage. In Annaly's case, debt is nearly 6.2 times equity. While that's not exceptionally high for the industry and for the relatively safe assets that Annaly has, it does heighten risk. Mortgage REITs are especially prone to risk as interest rates are rising. But rates are rising modestly and measuredly now, and Annaly has hedged its portfolio and has experience dealing with this environment.

Spirit Realty Capital

Spirit Realty has been kicked to the curb since early 2017, following a lackluster performance from one of its former tenants. But since then, a lot has happened to this owner of single-tenant retail properties. Perhaps the biggest news is that it spun off Spirit MTA (SMTA) earlier this year, and with it the company's direct exposure to that troubled tenant.

Now Spirit Realty seems well positioned, with a roster of tenants that looks comparable to one of the top players in the retail REIT world, but without that rival's price tag. For example, Spirit has similar exposure to convenience stores as does larger peer and blue-chip Realty Income (O 1.46%). But while Realty Income trades around 18 times FFO with a 4.7% yield, Spirit is selling at just 11.5 times FFO and yields 6.4%.

Spirit has also been aggressively repurchasing its own stock (a rare action for a REIT), retiring 11% of its stock since the first quarter of 2017. And then it authorized another repurchase in May 2017 for $250 million in stock, good for about 7% of the stock at today's prices. At these prices, I think it's a bargain.

Here's where the best REITs are hiding

While searching for interesting REITs, you should know about one loophole that keeps some of the best REITs far cheaper than they should be. Here's how to use this REIT loophole to identify great stocks that can power your dividend portfolio.