3 REITs I Like Better Than Realty Income

Introduction

This tutorial explores three Real Estate Investment Trusts (REITs) that are considered more attractive than Realty Income (ticker: O) for new investments. While Realty Income has been a well-regarded choice, this guide highlights alternatives that offer better growth potential and dividend prospects.

Step 1: Discover Agree Realty (ticker: ADC)

• Overview: Agree Realty is a net lease retail REIT closely resembling Realty Income but with promising growth prospects.
• Market Performance:
  • Market Cap: Approximately $6 billion
  • Recent Performance: Shares down 7% over the past year.
• Property Portfolio:
  • Owns around 2,200 properties.
  • Tenant Quality: Nearly 70% of annual base rent is from investment-grade tenants, surpassing Realty Income.
  • Top Tenants: Major tenants include Walmart and Tractor Supply.
• Dividend Insights:
  • Dividend Yield: Nearly 5%
  • 5-Year Dividend Growth Rate: 6.1% with four consecutive years of increases.
• Valuation:
  • Price to FFO (Funds From Operations): 14.6, compared to a 5-year average of 19.9.

Step 2: Explore Prologis (ticker: PLD)

• Overview: Prologis is an industrial warehouse REIT with a significant presence both domestically and globally.
• Market Performance:
  • Market Cap: Over $100 billion
  • Recent Performance: Shares down 11% in the last year.
• E-Commerce Growth:
  • Beneficiary of the e-commerce boom, as e-commerce tenants occupy three times more space than traditional brick-and-mortar.
  • Major tenants include Amazon, Home Depot, and FedEx.
• Dividend Insights:
  • Dividend Yield: 3.1%
  • 5-Year Dividend Growth Rate: 133%, with 10 consecutive years of increases.
• Valuation:
  • Price to FFO: 21.2, below its 5-year average of 29.2, indicating value despite the high growth rate.

Step 3: Consider Equinix (ticker: EQIX)

• Overview: Equinix is a leading data center REIT experiencing significant growth due to rising demand for data storage and cloud services.
• Market Performance:
  • Market Cap: $75 billion
  • Recent Performance: Shares have increased by 9% over the past year.
• Growth Factors:
  • Positioned well for the ongoing demand for data centers, accelerated by trends like remote work and AI advancements.
  • Operates in 33 countries, providing global exposure.
• Dividend Insights:
  • Dividend Yield: 2.2%
  • 5-Year Dividend Growth Rate: 11.3% with a low payout ratio, ensuring sustainability.
• Valuation:
  • Price to FFO: 22.3, compared to a 5-year average of 26.5, indicating a favorable valuation for growth.

Conclusion

In summary, while Realty Income remains a solid investment, Agree Realty, Prologis, and Equinix offer compelling alternatives with greater growth potential and more robust dividend growth. Consider the insights provided in this guide to evaluate these REITs further and determine which aligns best with your investment strategy.