10 Explosive REITs to Buy When You're Feeling Hesitant About Growth Stocks

If there's a clear investing theme in 2022, it's that growth stocks are quickly falling out of fashion.

Tech stocks had been big winners through 2020 and much of 2021, but high-growth stocks have mostly gotten killed this year as investors rotate to safer options over fears of inflation and rising interest rates.

While consumer staples and healthcare stocks have been among the beneficiaries of this trend, real estate stocks also look like a good option despite their cyclical nature, especially since real estate investment trusts (REITs) are reliable profit generators.

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Lumber is probably not your first thought when you think of a REIT, but the sector is more diverse than it might seem. It includes commodity plays like Weyerhauser (NYSE: WY), which is one of the biggest owners of timberland in the world, with roughly 11 million acres under its control.

The company has benefited from a surge in lumber prices, which are currently above $1,000 per thousand board feet. In 2021, its revenue jumped 35%, and earnings per share nearly tripled. It even awarded investors a special dividend.

With housing demand and lumber prices remaining elevated, 2022 should be a strong year for the stock as well, especially as it trades at a price-to-earnings (P/E) ratio of roughly 12.

ALSO READ: Investing in Lumber Stocks

E-commerce boomed during the pandemic, and like other areas of real estate, there's actually a shortage of industrial warehouses to hold all that inventory.

That's good news for Prologis (NYSE: PLD), owner of one billion square feet of logistics real estate serving customers like Amazon, Home Depot, and FedEx.

Not surprisingly, the e-commerce boom has been kind to Prologis, with the company finishing its most recent quarter with a 97.4% occupancy rate, and it showed off 12% growth in funds from operations per share.

Retail property has struggled, in general, with lower-class malls experiencing vacancies as shopping patterns shift to e-commerce. But high-end malls continue to thrive, like those owned by Simon Property Group (NYSE: SPG).

These kinds of properties, which host upscale retailers like the Apple Store, have come out of the other side of the pandemic looking strong.

The company finished 2021 with 93.4% occupancy and earnings per share nearly doubling from 2020 and topping 2019 levels, showing the company has made a full recovery from COVID-19.

And it continues to open new properties, including several joint ventures abroad.

ALSO READ: Investing in Retail REITs

Rental prices are soaring, and that's good news for apartment REITs like Mid-America Apartment Communities (NYSE: MAA), which owns Class A and Class B apartments.

Unlike other apartment REITs that favor new construction, Mid-American Apartments tends to buy properties and remodel them, which can be more lucrative than building from scratch.

Today, it owns more than 100,000 apartments and saw earnings per share more than double in 2021 during a boom year for the apartment market. With much of the country still experiencing a housing shortage, Mid-America is in a good position to continue growing.

If you love dividends, you'll love Realty Income (NYSE: O), a retail REIT specializing in convenience-store rentals. The company pays a monthly dividend and is a Dividend Aristocrat, having raised its dividend every year since it went public in 1994.

Realty Income's revenue jumped 26% last year, and it continues to acquire properties. Focusing on reliable tenants like Walgreens Boots Alliance, 7-11, and Dollar General makes it safer than many of its retail REIT peers.

The stock currently offers an attractive dividend yield of 4.1%.

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Presented by Motley Fool Stock Advisor

We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

STORE Capital (NYSE: STOR) is another retail REIT, this one focused on single-tenant operational real estate (or STORE).

That business model has given the company an especially high occupancy rate, at 99.5%, as it only has to work with one tenant at each property, eliminating some of the risks of being a landlord.

Its tenants cover a wide range of small businesses -- including restaurants, auto shops, pet shops, and furniture stores -- and it owns nearly 3,000 properties with more than 500 customers.

Revenue grew 13% last year to $782.7 million, driving a 17% increase in earnings per share.

ALSO READ: Here's Why the Best Is Yet to Come for STORE Capital

The healthcare sector is another worthwhile place to look for REIT stocks, and CareTrust REIT (Nasdaq: CTRE) is a good candidate here.

The company is focused on senior housing and healthcare-related properties, a growing market as the baby boomer population ages, especially those Americans 80 and over.

While the company has experienced some challenges due to the pandemic, which has caused seniors to delay moving into shared-living facilities, those headwinds should soon disappear as the impact of the pandemic begins to fade.

As a bonus, the stock offers a strong dividend yield of 6.7%.

Tech stocks may be struggling, but spending on technology continues to grow, and that means data center REITs should continue to perform well over the coming years.

Equinix (Nasdaq: EQIX) is one of the world's largest data center REITs, operating 240 data centers in 27 countries.

In 2021, revenue increased 11% to $6.6 billion, and the company expects another 9% growth in 2022, showing reliable growth in the data center industry. Equinix also enjoys an operating margin of 17%, a sign the business is highly profitable as well.

ALSO READ: Investing in Data Center REITs

Another winner in the apartment REIT space is AvalonBay Communities (NYSE: AVB).

The company tends to focus on higher-income areas of the country in the Northeast and on the West Coast, where it sees growth in high-wage jobs and lower housing affordability, which it believes offers an opportunity for greater returns.

AvalonBay currently owns 88,000 apartments and is growing its property base through acquisitions. While growth in 2021 was slow, the tailwinds in the housing market should help the company's financial performance over the coming years.

Storage has also boomed during the pandemic as retail spending increased and some Americans packed their homes into storage while they tried out new locales.

Public Storage (NYSE: PSA) is the world's largest self-storage company, and the company has delivered strong growth lately, with funds from operations increasing 37% to $13.36. It also finished the year with a 96.3% occupancy rate, a phenomenal number for a high-turnover business like storage.

The company expects another strong year in 2022, forecasting same-store sales growth of 12%to 15%.

5 Stocks Under $49

Presented by Motley Fool Stock Advisor

We hear it over and over from investors, "I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of "5 Growth Stocks Under $49" for FREE for a limited time only.

What makes REITs unique in the stock market is that they are required by law to pay out at least 90% of their profits as dividends. That tends to make them rewarding income stocks and more resistant to recession than the typical real estate stock, as real estate is a cyclical industry.

In an uncertain market like the current one, it's worth adding a few REITs to your portfolio, especially if you've been burned by tech stocks.

The list above is just a sample, and there's a lot of diversity in the REIT sector. You should be able to find something that suits your investing needs and risk profile.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman owns Amazon. The Motley Fool owns and recommends Amazon, Apple, Equinix, FedEx, Home Depot, Mid-America Apartment, and Prologis. The Motley Fool recommends AvalonBay Communities and STORE Capital and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.