Real estate investment trusts have become wildly popular over the past few years, particularly since they have provided some lovely returns while other investments have virtually stalled. As the Wall Street Journal recently noted, funds that contain real estate-centered stocks such as REITs have done exceedingly well over the past three years.
There are a plethora of REITs in business these days, but here are three retail REITs that seem to be showing some particular gusto and promise lately.
Washington Real Estate Investment (NYSE: WRE) is based in the Washington, D.C. area, and focuses on office properties, multifamily properties, and retail centers. This past summer, the company cut its dividend for the first time in over 50 years. Combine that with the fact that Washington RE missed expectations on revenue in Q2, and you might be forgiven for thinking that the company is in a muddle. Dig deeper, though, and some positives come to light: Despite the miss, the company still grew revenues year over year by nearly 8%, and the Q2 report shows that both rental income and tenant quality has improved substantially. Also, the D.C. area contains six of the country's 10 richest counties, and demand for rental housing is high, putting Washington RE in a very nice position indeed.
Resource Capital (NYSE: RSO) is a different animal, investing in commercial real estate mortgages. The company has been a real friend to its investors, just recently declaring a $0.20 per share dividend, and sporting a yield of over 13%. Forbes also profiled the stock, noting its sweet yield and attractive price-to-book ratio of 1.1. Resource Capital also announced its plan to sell one million shares of Series B Preferred Stock, planning to use the proceeds to reinvest in its growing business.
Realty Income (NYSE: O) has been in the news lately, primarily because of its planned purchase of American Realty Capital Trust (NYSE: ARCT). The purchase price, $1.9 billion in stock, marks the second-largest such REIT transaction so far this year, according to Bloomberg. While some analysts seem unsure of how well this marriage will work, it is notable that American Realty had a pretty good year of its own, seeing year-over-year revenue increases of 57%, and has agreed to buy $64 million of new properties, such as Family Dollar and Tractor Supply locations. Time will tell, of course, but it looks like the acquisition will meld nicely with that of Realty Income, making these two a match made in heaven.
One Fool's take
These particular REITs look poised to take advantage of the burgeoning markets in both rental properties and commercial lending. As always, do your due diligence, perhaps paying a little extra attention to these three companies -- all of which seem to have a lot going on that is worthy of investor attention.
Retail REITs aren't the only game in town when it comes to income investing. I invite you to Secure Your Future With 9 Rock-Solid Dividend Stocks that our own analysts have put together in this special report. Start planning your future by grabbing your free copy here.
