It's challenging to navigate the current market turmoil and find stocks that can provide stability to your portfolio. However, there is a class of stocks that, if chosen wisely, can help you achieve just that—real estate investment trusts (REITs). With approximately 225 publicly traded REITs, these income-producing portfolios are legally required to distribute at least 90% of their taxable income to shareholders in the form of dividends.
Now, it's important to note that REITs haven't emerged unscathed from the recent downturn. For instance, the Vanguard Real Estate Index Fund ETF, which consists of around 160 REITs, has witnessed a decline of about 19% year-to-date, even worse than the approximately 17% drop in the S&P 500.
However, within that collection, several individual REITs have consistently outperformed the market in recent years. Let's take a closer look at three notable REITs, each with a portfolio and experience that positions them for continued success when the tides turn. Plus, in the meantime, they provide a reliable stream of passive income to help mitigate the current uncertainty.
Extra Space Storage
First on our list is Extra Space Storage (EXR), a highly visible name in the self-storage industry. With a portfolio comprising 2,130 stores across 41 states and Washington D.C., Extra Space Storage is the second-largest owner/operator in the business (second only to Public Storage) and the largest self-storage management company in the United States.
This type of business is well-positioned to counteract the effects of inflation by raising rents on its short-term leases. As Extra Space Storage CEO Joe Margolis mentioned in the Q1 2022 earnings announcement, the company has had an exceptional start this year, driven by high occupancy and strong pricing power.
Given these strong fundamentals, it's optimistic to assume that the company will continue growing its dividend. In fact, they have already raised it by 20% quarter over quarter and 50% year over year.
Sun Communities
Next up is Sun Communities (SUI), a REIT that has been in operation since 1975 and publicly traded since 1993. Over the years, Sun Communities has built a portfolio that includes more than 159,300 RV sites, 47,500 wet slips and dry storage spaces, and 603 properties encompassing manufactured homes, recreational vehicles, and marinas. These properties are spread across 39 states, Puerto Rico, Canada, and the United Kingdom.
Sun Communities has been active in acquiring properties, investing a substantial $9.9 billion since 2010, including $1.6 billion for 45 properties this year alone. In its Q1 2022 earnings report, the company emphasized the demand for affordable housing and outdoor vacationing, identifying these trends as sustained tailwinds for its business. This suggests smooth sailing for this unique residential REIT in the foreseeable future.
SBA Communications
The third REIT on our list is SBA Communications (SBAC), the smallest of the major mobile tower REITs. While it operates around 30,000 towers in total, its competitors, Crown Castle International and American Tower, boast more than 40,000 and 220,000 towers, respectively. However, SBA Communications is by no means insignificant in the face of competition.
Established in 1989, SBA Communications has expanded its operations to encompass 16 markets across North and South America, including Brazil, the Philippines, and Africa, with a particular focus on South Africa. In its Q1 2022 earnings report, SBA CEO Jeffrey Stoops expressed satisfaction with the strong demand across all their markets. Additionally, SBA is actively supporting the rollout of 5G networks for U.S. carriers, which, combined with their order backlogs, promises ongoing growth at least until 2023.
Given the continued expansion of mobile communications, particularly the accelerated adoption of 5G networks, SBA Communications is well-positioned for sustained growth over the next decade and beyond.
Why it's a good idea to buy and hold each of these for the next decade
So, what makes these three REITs attractive long-term investments? Let's delve into each one.
Extra Space Storage stands out with its strong presence in the self-storage industry. By leveraging its extensive portfolio and raising rents on short-term leases, the company can mitigate the effects of inflation and continue generating significant profits.
Sun Communities, with its diverse range of properties across multiple regions, is capitalizing on the demand for affordable housing and outdoor vacationing. With a solid track record of property acquisitions and sustained tailwinds, Sun Communities is well-poised for future growth.
Finally, SBA Communications, although smaller in scale compared to its competitors, is actively capitalizing on the growing demand for mobile communications infrastructure. With a strong presence in multiple markets and a focus on supporting the rollout of 5G networks, SBA Communications is primed for continued expansion in the coming years.
If you're looking for stable, income-generating investments to weather the storms of the market and potentially secure long-term growth, these three REITs should be on your radar.