Property can be a great asset to diversify exposure and income generation for investors, but it isn’t necessarily the most affordable option. Well, let me introduce you to real estate investment trusts (REITs), the way all investors can own a piece of real estate for themselves.
What is a REIT?
A REIT is a portfolio of commercial real estate that is managed by a fund. Just like any other stock, you can purchase shares off of a stock exchange like the NYSE or NASDAQ. The owned property will be leased out to businesses to generate income and shareholders will receive a share in the profits through dividends. So, without further ado, here are some top picks.
Global X Data Center REITs & Digital Infrastructure ETF
Global X Data Center REITs & Digital Infrastructure ETF (NASDAQ: VPN) is a REIT that specializes in leasing property to data center operators. The industry is becoming more and more lucrative as services become digital, and companies need appropriate facilities that ensure high-speed connectivity, low energy costs, and suitable weather conditions. This demand is predicted to accelerate with the rise of streaming services, enterprise software, autonomous vehicles, and 5G technology.
American Tower REIT
Speaking of 5G, American Tower (NYSE: AMT) is a network communications kingpin when it comes to property management for the industry. Starting from humble beginnings as a radio tower company in 1995, AMT has become the largest REIT in the world, boasting a market capitalization of well over $100 billion. It hasn’t taken a breath to slow down either, producing a return of approx 150% in the last five years for investors — and that’s on top of its 1.9% dividend.
Innovative Industrial Properties
Innovative Industrial Properties (NYSE: IIPR) is unique compared to other REITs — it is one of the few that operates in the cannabis sector. But it’s also growing fast. The company has sustained double-digit revenue growth — triple-digit until recently — in revenue for a number of years now, and it continues to expand facilities in new states that are revising legislation for both medical and recreational marijuana. The fund concentrates on providing tools for renters by providing infrastructure for growing cannabis, packing, transporting, and managing overall logistics efficiently. Just like the other two here, this industry continues to grow rapidly, and the cherry on top, it offers a 2.45% dividend too!
REITs serve those of us that want to own a little bit of property without requiring crazy capital — and just like the above, if you can pick those ones in growth mode, you can get a little extra return on top of those dividends. While REITs might not be the most attractive investment for achieving outsized returns, they are generally steady and predictable, which can make them a good addition to a diversified portfolio.
Financial Writer at MyWallSt
David's favorite stock is Google. He's a daily user of its YouTube platform, where you can learn or find something brand new at the touch of a button. He believes the company will continue to grow for many years to come.