It's tempting to wallow in despair as the stock market tumbles, but doesn't history tell us that such low points are a great time to prepare for the next rally?
After all, the stock market has rewarded shareholders with an average return of 10% per year for the past 50 years. There are going to be downturns, of course, and this one may well turn out to be a doozie, but there are ways to still bring home the bacon even as investors get fried.
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One sector to consider right now are real estate investment trusts (REITs). They own income-producing pools of properties and are required to pay at least 90% of their taxable income to shareholders in the form of dividends.
There are more than 225 publicly traded REITs and their dividends can be significant. The average REIT is yielding a bit north of 3% right now, more than twice that of the S&P 500.
Well-run REITs not only provide passive income, but they carry the inflation-resistant benefits of real estate investment in general. That's because their income is dependent on rents, and property owners can benefit from both inflation clauses in existing leases and the ability to raise rents when leases expire.
Beating inflation by being "exceptionally good at something"
When it comes to thriving during inflation, "the best thing you can do is to be exceptionally good at something," Warren Buffett said at the recent Berkshire Hathaway annual meeting. Below are some REITs that are bearing that out right now.
Camden Property Trust (CPT -1.07%) is one of the largest publicly traded multifamily property owners/operators in the country, with 170 properties and about 58,000 apartments in its portfolio. This residential REIT has been taking advantage of the short-term nature of such leases, raising rents by about 15% year over year. The company just raised its quarterly dividend by about 13% to $0.94 per share, yielding about 2.53% at a share price of about $144.93.
Crown Castle International (CCI -1.36%) has a portfolio of more than 40,000 cell towers and about 80,000 route miles of fiber cable across the country and is heavily committed to ramping up its small cell node business to accommodate the growth of 5G networks in buildings and neighborhoods. This infrastructure REIT has raised its dividend for nine straight years and is currently yielding about 3.27% at a share price of about $179.55 and a quarterly dividend of $1.47.
Agree Realty (ADC -1.07%) is a retail REIT with a current portfolio of 1,510 properties nationwide and a client list heavily skewed toward investment-grade companies that reliably pay the gradually growing rent. This strong performer pays dividends monthly, at a current rate of $0.234 month, providing shareholders with a yield of about 4.17% at a share price of about $67.34.
ADC Total Return Level data by YCharts
As the chart above shows, two of these stocks have beaten the S&P 500 in total return over the past 10 years, while the third, Camden Property Trust, is within shouting distance. And that particular REIT is in a position to catch up, considering the positive prospects for multifamily investment in the immediate years ahead.
Each of these companies also is an excellent example of a stock that can still bring home the bacon while investors wait for the greater market to resume its sizzle.
