Should Investors Consider Investing In These Real Estate Stocks?

Real estate stocks have been stellar performers in the stock market this year. With COVID-19 cases having plunged dramatically from their highs, it’s not difficult to see why real estate stocks are in demand right now. What’s more, many experts suggest that the real estate sector is likely to continue to outperform other sectors in the remaining months of 2021. Year to date, the Vanguard Real Estate Index Fund ETF (NYSE: VNQ) has risen by roughly 26%, easily beating the 18% gains from the S&P 500. A rising dividend yield among real estate stocks is just one part of the allure. 

Why Are Real Estate Stocks In Favor Right Now?

Real estate stocks have been a popular investment for income-oriented investors. But one major reason investors are looking to invest in real estate stocks or real estate investment trusts (REITs) now is higher inflation. That’s because real estate stocks can offer a natural hedge against inflation due to their ability to raise rents. Data from the National Association of REITs also shows that this asset class outperforms the S&P 500 Index 80% of the time during periods of high and rising inflation. 

Additionally, the scarcity of high dividend yields also makes an investment in the property sector attractive. The average REIT clocks in around 3%, which is more than double the S&P 500’s 1.33% dividend yield. That makes it a great venue for income-seeking investors to park their cash. What’s more, pending home sales for August rose 8.1% from July, the National Association of Realtors (NAR) reported Wednesday. That far exceeded analysts’ estimates of a 1% increase, according to CNBC. NAR’s chief economist Lawrence Yun had this to say, “Rising inventory and moderating price conditions are bringing buyers back to the market.” 

As a result, investors may also be looking for real estate stocks to buy that could benefit from the rising demand for housing. And the great news is that the growth may not be slowing down anytime soon. With all that in mind, here is a list of top real estate stocks to buy that can help you take advantage of the current real estate market. 

Top Real Estate Stocks To Watch In October 2021

Realty Income

No list of top real estate stocks is complete without Realty Income. The company owns more than 6,700 properties, most of which are occupied by retail tenants. That makes up 80% of the portfolio holding. While several REITs pay monthly dividends, this company’s monthly payout is a crucial part of its identity. In fact, the company actually trademarked “The Monthly Dividend Company” as its official nickname. Look no further if you want a safe and consistent payout for your portfolio. The REIT even boasts on its homepage it’s 614 consecutive monthly dividends paid and 4.3% annualized dividend growth since 1994.

What’s making Realty Income a compelling investment is its portfolio of strong clientele. After all, it has top tenants like Walmart (NYSE: WMT) and Dollar General (NYSE: DG). And these tenants should continue to do well and bring in a stable revenue stream for the company. A good dividend record alone, however, isn’t enough to keep you sleeping soundly at night. The company has agreed to buy peer Vereit (NYSE: VER), which will push its numbers of properties to over the 10,000 mark. Given all of this, it seems to me that O stock is a great real estate stock that’s about to get even better.

real estate stocks (O stock)
Source: TD Ameritrade TOS

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Innovative Industrial Properties

Another name to consider is Innovative Industrial Properties (IIPR). Most seasoned investors in the field would be familiar with IIPR. In essence, the company is a real estate investment trust (REIT) operating mainly in the cannabis industry. As such, IIPR mainly acquires and manages specialized properties that will be leased as regulated cannabis facilities. It currently owns 75 properties across 19 states, equal to some 7.3 million square feet.

All of these were leased to state-licensed marijuana growers for an average period of 16.7 years. In theory, with the possibility of federal legalization lighting a fire under marijuana stocks, IIPR stock would also stand to benefit. After rising by over 280% since its pandemic era low, could the stock be worth jumping on? 

If anything, we could take a look at the company’s latest quarter fiscal posted earlier in August. In it, IIPR saw green across the board. The company posted massive year-over-year jumps of 100% in total revenue and 120% in net income. Earlier this week, IIPR announced that it is extending its long-term real estate relationship with cannabis company Goodness Growth. In detail, IIPR is acquiring approximately 92.3 acres in New York adjacent to one of IIPR’s properties leased to Goodness Growth. Besides, the duo will partner on the development of 324,000 square feet of industrial space. Given IIPR’s current momentum, would you consider IIPR stock a top real estate stock to buy right now?

IIPR stock chart
Source: TD Ameritrade TOS

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AGNC Investment Corp.

AGNC Investment Corp is the largest mortgage REIT by market cap. The mREIT has made a strong comeback after an underwhelming 2020. For those unfamiliar, the company uses its in-house subsidiaries to help package, buy, and sell government-backed mortgages secured by residential real estate. While mortgage REITs may not be a favorite on Wall Street, there’s no question about AGNC’s consistent dividend yield. The REIT has an annualized dividend yield of more than 9%.

What’s more, AGNC almost exclusively invests in agency securities. For those unfamiliar, these assets are backed by the federal government in the event of default. If you’re an investor in the stock market today, you probably know a thing or two about rising interest rates. And that is among the reasons why stocks were down. While it may be bad for stocks in general, a rising interest rate can actually benefit AGNC. For this reason, some may see AGNC stock as a defensive play in the highly volatile stock market we are having today. With that in mind, would you add AGNC stock to your watchlist?

best real estate stocks (AGNC stock)
Source: TD Ameritrade TOS

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