It can be hard to look at the carnage in the markets right now and identify stocks that can restore some stability to your damaged portfolio. But there is a whole class of them that, well-picked, can help you do just that.
We're talking about real estate investment trusts (REITs). There are about 225 publicly traded REITs now. They operate income-producing portfolios and are required by law to pass through at least 90% of their taxable income to shareholders in the form of dividends.
To be clear, REITs haven't escaped the downturn. For instance, the Vanguard Real Estate Index Fund ETF (VNQ -0.17%) -- a weighted collection of about 160 REITs -- is down about 19% year-to-date, even worse than the about 17% for the S&P 500.
But in that collection are a number of individual REITs that have outperformed the greater market for years. We'll take a look at three of them that have the portfolios and experience to do the same when things turnaround. And until then, you can even sleep a little better at night knowing that each of these stocks are providing a nice stream of passive income to help smooth things over for now.
The three we'll look at here are Extra Space Storage (EXR 1.15%), Sun Communities (SUI -1.35%), and SBA Communications (SBAC -2.76%). Their 10-year total returns, respectively, are about 689.9%, 518.7%, and 423.3%, compared with the 258.8% that the S&P 500 has provided in total return from 2012 to 2022.
Total return, of course, takes into account both share price and dividend payouts, and as REITs, these stocks have the tax law obligation to pay to shareholders at least 90% of the company's taxable income. Here's a look at what that total return would look like now if you had put $10,000 into each of those at this point in 2012.
Why it's a good idea to buy and hold each of these for the next decade
So, what makes each of these portfolios potential profit-generators for at least the next 10 years? Let's take a quick look at each.
Extra Space Storage: With its ubiquitous green signs, Extra Space Storage is a highly visible presence in the self-storage business, boasting a portfolio of 2,130 stores that it either owns, operates, or both in 41 states and Washington, D.C. That makes it the second-largest owner/operator in the business (after Public Storage) and the largest self-storage management company in the country.
This is the kind of business that can blunt inflation's effects by raising the rent on all those short-term leases, and as CEO Joe Margolis said on the first-quarter 22 earnings announcement: "We are off to an exceptional start in 2022, driven by high occupancy and strong pricing power."
Those strong fundamentals can be expected to continue going forward, and that lends optimism to the notion the company could continue growing the dividend, too, after raising it 20% quarter over quarter and 50% year over year.
Sun Communities: This REIT has been in business since 1975 and publicly traded since 1993. During that time, it's built a portfolio of more than 159,300 RV sites and 47,500 wet slips and dry storage spaces at 603 manufactured home, recreational vehicle, and marina properties in 39 states, Puerto Rico, Canada, and the United Kingdom.
Sun says it's bought $9.9 billion in properties since 2010 -- including $1.6 billion for 45 properties so far this year alone -- and in its Q122 earnings report cited "the demand for attainable housing and outdoor vacationing" as providing "sustained tailwinds" for its business. That points toward more smooth sailing ahead for this unique residential REIT.
SBA Communications: SBA Communications is the smallest of the big three mobile tower REITs -- with about 30,000 overall, compared to more than 40,000 and 220,000, respectively, for Crown Castle International and American Tower.
But this REIT is no shrinking violet in the face of competition. SBA has been around since 1989 and is expanding its operations that already include 16 markets in North and South America (especially Brazil), the Philippines, and Africa (especially South Africa).
In its Q122 earnings report, SBA CEO Jeffrey Stoops said they're seeing strong demand in substantially all their markets and that they're actively helping its U.S. carriers build out their 5G networks while working through order backlogs that should keep the business growing from just that through at least 2023.
Given the continuing growth of mobile communications in general, watch for this provider of essential infrastructure to continue its own growth for the next decade and beyond.