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Markets soared today on news that the Federal Reserve believes now is the time to start cutting interest rates after several years of high inflation.
With the possibility of multiple rate cuts back on the table this year, Real Estate Investment Trusts (REITs) may stand to benefit the most as these equities rely on debt to finance their operations and acquire properties.
Seeing as rate cuts would help to stabilize their operating environment here are three REITs to consider that all sport a Zacks Rank #1 (Strong Buy).
Engaged in leasing, managing, and redeveloping properties is Alexander’s which has already seen very positive revisions regarding its earnings outlook. To that point, Alexander’s robust bottom line is foreshadowed to decline but earnings estimate revisions have soared over the last 30 days.
Suggesting more short-term upside in Alexander’s stock is that fiscal 2024 earnings estimates have spiked 15% in the last month to $13.65 per share compared to estimates of $11.82 a share 30 days ago. Plus, FY25 EPS estimates have soared 40% in the last month to $9.92 versus $7.07 a share 30 days ago.
Image Source: Zacks Investment Research
Furthermore, Alexander’s stock trades at a reasonable 16.6X forward earnings multiple and offers a 7.93% annual dividend yield that towers over the S&P 500’s 1.27% average and trumps many of its Zacks Real Estate Market peers.
Operating healthcare-related facilities, CareTrust is a REIT that has seen steady earnings growth despite a tougher inflationary environment. Rate cuts could catapult CareTrust’s probability with annual earnings expected to be up 4% in FY24 and slated to rise another 10% in FY25 to $1.62 per share.
CareTrust’s rapid top line expansion also alludes to its future earnings potential with total sales projected to climb 27% this year and expected to expand another 11% in FY25 to $307.76 million.
Image Source: Zacks Investment Research
Notably, CareTrust’s stock has soared +30% year to date but still trades at a reasonable earnings multiple of 19.6X. CareTrust’s 4.02% annual dividend yield also edges many of its real estate peers and the benchmark.
Rounding out the list is NexPoint Real Estate Finance which originates, structures, and invests in first mortgage loans, mezzanine loans, preferred equity, and alternative structured financings in commercial real estate.
NexPoint’s massive dividend may certainly catch the attention of income investors with a current yield of 13.24%.
Image Source: Zacks Investment Research
More reassuring is that NexPoint trades at 12.4X forward earnings with EPS expected to dip -34% in FY24 but projected to rebound and soar 72% next year to $2.08 per share.
Image Source: Zacks Investment Research
Bottom Line
Rate cuts would start to propel REITs and Alexander’s, CareTrust, and NexPoint have enticing dividends that attract investors to these equities. With earnings estimate revisions starting to trend higher for these highly ranked REITs, their favorable valuations also indicate now is a good time to buy.
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3 Highly Ranked REITs to Buy with Rate Cuts Ahead
Markets soared today on news that the Federal Reserve believes now is the time to start cutting interest rates after several years of high inflation.
With the possibility of multiple rate cuts back on the table this year, Real Estate Investment Trusts (REITs) may stand to benefit the most as these equities rely on debt to finance their operations and acquire properties.
Seeing as rate cuts would help to stabilize their operating environment here are three REITs to consider that all sport a Zacks Rank #1 (Strong Buy).
Alexander’s (ALX - Free Report)
Engaged in leasing, managing, and redeveloping properties is Alexander’s which has already seen very positive revisions regarding its earnings outlook. To that point, Alexander’s robust bottom line is foreshadowed to decline but earnings estimate revisions have soared over the last 30 days.
Suggesting more short-term upside in Alexander’s stock is that fiscal 2024 earnings estimates have spiked 15% in the last month to $13.65 per share compared to estimates of $11.82 a share 30 days ago. Plus, FY25 EPS estimates have soared 40% in the last month to $9.92 versus $7.07 a share 30 days ago.
Image Source: Zacks Investment Research
Furthermore, Alexander’s stock trades at a reasonable 16.6X forward earnings multiple and offers a 7.93% annual dividend yield that towers over the S&P 500’s 1.27% average and trumps many of its Zacks Real Estate Market peers.
Image Source: Zacks Investment Research
CareTrust (CTRE - Free Report)
Operating healthcare-related facilities, CareTrust is a REIT that has seen steady earnings growth despite a tougher inflationary environment. Rate cuts could catapult CareTrust’s probability with annual earnings expected to be up 4% in FY24 and slated to rise another 10% in FY25 to $1.62 per share.
CareTrust’s rapid top line expansion also alludes to its future earnings potential with total sales projected to climb 27% this year and expected to expand another 11% in FY25 to $307.76 million.
Image Source: Zacks Investment Research
Notably, CareTrust’s stock has soared +30% year to date but still trades at a reasonable earnings multiple of 19.6X. CareTrust’s 4.02% annual dividend yield also edges many of its real estate peers and the benchmark.
Image Source: Zacks Investment Research
NexPoint Real Estate Finance (NREF - Free Report)
Rounding out the list is NexPoint Real Estate Finance which originates, structures, and invests in first mortgage loans, mezzanine loans, preferred equity, and alternative structured financings in commercial real estate.
NexPoint’s massive dividend may certainly catch the attention of income investors with a current yield of 13.24%.
Image Source: Zacks Investment Research
More reassuring is that NexPoint trades at 12.4X forward earnings with EPS expected to dip -34% in FY24 but projected to rebound and soar 72% next year to $2.08 per share.
Image Source: Zacks Investment Research
Bottom Line
Rate cuts would start to propel REITs and Alexander’s, CareTrust, and NexPoint have enticing dividends that attract investors to these equities. With earnings estimate revisions starting to trend higher for these highly ranked REITs, their favorable valuations also indicate now is a good time to buy.