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Motley Fool Issues Rare “All In” Buy Alert
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The stock market keeps fighting volatility, putting conventional buy-and-hold wisdom to the test. Is now the time to hold or even buy stocks in great companies?
If you choose to take that long-proven path to prosperity, here are three real estate stocks to consider. They’re real estate investment trusts (REITs) with solid records of dividend payouts that will reward you for your patience.
Image source: Getty Images.
STORE Capital (STOR 1.54%) has a portfolio that, as of the second quarter, numbered 3,012 properties operated by 579 tenants in 49 states. The company focuses on unit-level profitability, seeking out and holding on to profitable locations.
It’s been working so far. Since going public in 2014, STORE Capital has provided shareholders a total return of about 96%, nearly twice that of the benchmark Vanguard Real Estate ETF.
The company’s name stands for “Single Tenant Operational Real Estate.” This is a broadly diversified portfolio that, as of the second quarter, includes 759 restaurants, 168 medical and dental offices, 33 food processors, 114 medical fabricators, 279 early childhood centers, and eight Bass Pro Shops. It’s also growing quickly, adding 62 properties it purchased for $392 million in the second quarter alone.
Warren Buffett gave STORE a big boost in 2017 by paying $377 million for 9.8% of the REIT’s shares — his only such holding — and Berkshire Hathaway still owns more than 5% of the REIT.
Buffett and other shareholders are currently enjoying a yield of about 5.8% following seven straight years of dividend increases. Shares are trading now at about $26.50, down about 23% year to date.
STORE’s portfolio is 99.5% filled with leases with an average of about 13 years remaining. Therefore, this REIT should continue building on its record as a passive-income machine.
Gladstone Commercial (GOOD 0.84%) is a much smaller operation than STORE Capital but with an equally impressive record and good prospects. Since it went public in 2003, this industrial and office REIT has closely tracked the S&P 500 in total return, while consistently providing a higher yield.
In this case, that’s a payout of $0.1254 a month, good for a yield of about 8% and roughly matching inflation today. And it’s far higher than the 1.7% or so from the S&P 500. Shares are currently trading for about $18.75 — down nearly 28% year to date.
David Gladstone, founder and CEO of Gladstone Commercial and three other Nasdaq-listed real estate investment trusts, told The Motley Fool in a recent interview that he considers this offering a solid choice for retirees or anyone else seeking steady monthly income. He also shared that his companies are managed with that in mind.
GOOD currently holds 136 properties in 27 states, with a client list of 112 tenants. The company is reducing its share of office properties in favor of industrial ones, which CEO Gladstone considers a much more promising sector.
In fact, all 15 of its prospective acquisitions are industrial properties. Gladstone says onshoring and other trends make that sector attractive, especially in light of return-to-office concerns. He noted, “There aren’t many manufacturing jobs that you can do from home.”
Marc Rapport has positions in Gladstone Commercial, STORE Capital, and Vanguard Real Estate ETF. The Motley Fool has positions in and recommends Berkshire Hathaway (B shares), STORE Capital, and Vanguard Real Estate ETF. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/10/2022.
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Calculated by Time-Weighted Return since 2002. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.
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