Success in investing for most folks involves the long game, in the form of choosing stocks in great companies and hanging on for years or even decades.
Real estate investment trusts (REITs) are a good choice for that strategy. They own pools of income-producing property, and tax law mandates that they distribute at least 90% of their income as dividends to shareholders.
There are about 225 publicly-traded REITs, providing the opportunity for diversity within a sector noted for its stability and defensive nature in the face of inflation and recession. Some stand out from the rest, including many of the largest.
Three very large REITs that would make fine choices for a third each of that $3,000 you might be fixing to place in the market right now are American Tower (AMT -0.70%), Realty Income (O -0.17%), and Prologis (PLD 0.69%).
This chart shows how well these three REITs have performed since 2009 against the benchmark Vanguard Real Estate ETF, an exchange-traded fund that typically holds about 160 REITs. It's a weighted index fund, and these three REITs are among its largest components, further underlining their sector outperformance.
O total return level data by YCharts.
The chart also shows how American Tower and Realty Income have outperformed the S&P 500 in total return over the same period, while Prologis has only slightly trailed the big index. Here's more about putting $1,000 to work in each of them.
1. American Tower
American Tower has a portfolio of more than 226,000 communications sites, the largest such collection held by a private company in the world, and a market cap of about $82 billion that ranks it second among U.S. REITs by that measure.
Despite its name, American Tower has a distinct global presence, with operations in 25 countries on six continents. Its primary business is developing and leasing its must-have tower space to wireless carriers and broadcast companies, among thousands of other customers.
This infrastructure REIT also has recently gotten heavily into data centers and 5G network support through small cell towers and similar technologies. These are necessary to support the explosive growth of data bandwidth and storage required for artificial intelligence (AI) and the Internet of Things, and myriad other applications.
The stock is selling for about $176, so a $1,000 investment will get you about five or six shares with a yield of about 3.6% from a stock that has seen its dividend raised for 13 straight years.
2. Realty Income
Realty Income is a top 10 REIT with a market cap of about $39 billion and a reputation as a leader among income stocks based on a record of 638 straight months of payouts. The self-named Monthly Dividend Company also has raised its dividend 121 times since it went public in 1994.
This giant among retail REITs has grown its portfolio to more than 13,100 net-lease properties with 99% occupancy and a roster of more than 1,300 different tenants (including a large number of brand-name retailers) in 85 different industries. Most of its business is in the United States, but it has a growing presence in Europe, too.
Your $1,000 here can buy about 18 shares of Realty Income at its current price of about $56. And the yield of about 5.5% will either put some cash in your pocket or can be reinvested to take advantage of the power of compounding with your stake in this venerable income stock.
3. Prologis
Prologis is the world's largest owner of warehouses. With a market cap now at about $112 billion, it's the largest REIT in the world by that measure, too. The company now owns or has investments in about 1.2 billion feet of logistics space in 19 countries. It also provides a growing array of value-add services to about 6,700 customers.
Prologis is an industrial REIT, a sector widely expected to continue its strong performance and growth serving e-commerce and the global supply chain. The company's largest customers are a who's who of major e-commerce companies, retailers, and transportation firms, and it continues to grow both organically and through acquisitions while maintaining record-high occupancy.
Prologis says about $2.7 trillion in goods, representing 2.8% of the world's gross domestic product, flows through its buildings each year.
The stock currently sells for about $121 a share, so you can pick up about eight shares for $1,000. The dividend has been raised for 10 straight years, including by about 14% a year over the past three years, putting the yield at about 2.9% and pointing to more dividend growth ahead.
Buy these three and watch your nest egg grow
Building your nest egg with the three companies covered here is a great idea. Each one merits a third of that $3,000 you might be waiting to invest. There will be downs as well as ups, of course, but their record and prospects make all of them strong candidates to buy and hold for the long term.
