Real Estate Sector Ideas

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DLR, STAG - >>> The 3 Smartest Real Estate Stocks to Buy Right Now


Motley Fool

By Justin Pope

Mar 25, 2022


https://www.fool.com/investing/2022/03/25/the-x-smartest-real-estate-stocks-to-buy-right-now/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


KEY POINTS

Digital Realty Trust is poised to benefit from increased data center demand.

STAG Industrial is heavily involved in e-commerce.


Looking to buy real estate? It's hard to go wrong with these three real estate investment trusts (REITs).

Inflation is rampant, eating away at the buying power of your hard-earned money. You can protect yourself by investing in assets that tend to appreciate along with inflation; real estate is an excellent example.

The trick is, how do you afford to invest in real estate? Most people don't have the disposable income to buy investment properties, but there is a solution. You can purchase shares of special companies called real estate investment trusts (REITs); these publicly traded businesses acquire and lease real estate and share the profits with shareholders through dividends.

If you don't know where to start, here are three blue chip REITs that have the fundamentals to pay you well and grow your money over time.

1. Digital Realty Trust

Data centers are becoming increasingly important as more of the economy goes digital and companies move their information to the cloud. Digital Realty Trust ( DLR 0.45% ) is a REIT that acquires, develops, and operates data centers. Digital Realty operates data centers in 50 metro areas worldwide, supporting more than 178,000 cross-connects, the physical connections made within a data center.

The company's bookings, a leading indicator for rental income, hit an all-time high of $156 million in the fourth quarter of 2021. For reference, bookings rarely exceeded $50 million until 2017, which underlines the broad shift from on-premises servers to data centers in recent years. Research firm Gartner estimates that global spending on data center systems will grow more than 11% in 2022 to $226 billion, which should continue benefiting companies like Digital Realty.

Investors will get paid a solid dividend to hold shares; it currently yields 3.5%. The company has raised its dividend for the past 17 years at an average rate of more than 5% per year. Digital Realty has a lot to offer if you're looking for a reliable investment with future growth potential.

2. Stag Industrial

Retail is worth nearly $5 trillion in the United States alone, and e-commerce is steadily becoming a larger chunk of it. Statista estimates that e-commerce now accounts for 14% of total U.S. retail sales, and Stag Industrial ( STAG -1.30% ) is a REIT that could expose your portfolio to this growing segment. It acquires and leases industrial properties but focuses on e-commerce-related properties, which account for roughly 40% of its portfolio.

Management believes that e-commerce penetration could increase to 30% by the end of the decade, which would likely mean a need for more warehouses and distribution centers, much like the properties that Stag Industrial acquires.

Stag grew funds from operations (FFO), the cash profits that REITs report, 19% year over year in 2021. Industry reports from CBRE indicated that industrial space ended the year in high demand, and STAG's management issued its most optimistic guidance for same-store sales growth in the company's history heading into 2022.

In recent years, Stag has been a solid dividend stock, offering a payout with a 3.5% dividend yield at the current share price. The company has increased its dividend for the past eight years but doesn't offer much in dividend growth; it's grown less than 1% annually over the past five years. Still, if you're looking for a way to invest in e-commerce real estate, Stag is a solid option.

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