REITs provide investors with the advantages of commercial real estate investment combined with the benefits of owning a publicly traded stock. Therefore, fundamentally strong REITs, such as American Tower Corporation (AMT), Lamar Advertising Company (LAMR), and Gaming and Leisure Properties, Inc. (GLPI), might be worthy buys for passive income.

REITs are required by law to pay out at least 90% of their taxable income to shareholders in the form of dividends. REITs generate stable income from the rents paid by tenants of commercial properties, who often commit to long-term leases, or from the interest payments on the financing of these properties. Hence, amid economic turmoil, REITs conventionally emerge as stable investments.

Moreover, the rise in global demand for warehousing and storage facilities, fueled by e-commerce growth, the expanding residential sector, and government support toward infrastructure development, is quite apparent. As a result, the REIT market is estimated to grow at a CAGR of 2.8% by 2027.

Considering these conducive trends, let’s take a look at the fundamentals of the three best REITs – Diversified stocks, beginning with the third choice.

Stock #3: American Tower Corporation (AMT)

AMT is a leading independent owner, operator, and developer of multitenant communications real estate. Its portfolio includes over 224,000 communications sites and a highly interconnected footprint of U.S. data center facilities.

AMT pays a $6.56 per share dividend annually, translating to a 2.91% yield on the current share price. Its four-year dividend yield is 6.56%. Also, the company’s dividend payouts have increased at a CAGR of 10.5% over the past three years.

AMT’s 3.78% trailing-12-month Return on Total Assets is 177.7% higher than the industry average of 1.36%. Furthermore, the stock’s 21.95% trailing-12-month net income margin is 149% higher than the industry average of 8.82%.

AMT’s total revenue for the second quarter ended June 30, 2024, was reported at $2.90 billion, up 4.6% year-over-year. Net income attributable to AMT common stockholders grew 89.3% year-over-year to $900 million. Net income attributable to AMT common stockholders per share increased 88.2% year-over-year to $1.92.

Street expects AMT’s revenue for the quarter ending September 2024 to increase marginally year-over-year to $2.84 billion. Its EPS is expected to be $2.55 for the same quarter. AMT surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.

The stock gained 27.4% over the past nine to close the last trading session at $234.64.  

AMT’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.    

AMT also has an A grade for Sentiment and a B for Momentum, Stability, and Quality. It is ranked #8 in the 45-stock REITs – Diversified industry. 

Beyond what is stated above, we’ve also rated AMT for Growth and Value. Get all AMT ratings here.

Stock #2: Lamar Advertising Company (LAMR)

LAMR is an outdoor advertising company in the United States and Canada. The company owns and operates billboards, logo signs, and transit advertising displays and rents space for advertising on billboards, buses, shelters, benches, logo plates, and airport terminals.

LAMR pays an annual dividend of $5.20, which translates to a yield of 4.3% at the current share price. Its four-year average dividend yield is 4.25%. Also, the company’s dividend payouts have increased at a CAGR of 26.8% over the past three years.

In terms of the trailing-12-month Capex / Sales, LAMR’s 5.76% is 66.5% higher than the 3.46% industry average. Similarly, the stock’s 0.33x trailing-12-month asset turnover ratio is 150.9% higher than the 0.13x industry average. Moreover, its trailing-12-month net income margin of 23.26% is 137.1% higher than the 9.81% industry average.

LAMR’s net revenues for the first quarter that ended March 31, 2024, increased 5.7% year-over-year to $498.15 million. Its operating income grew 4.9% from the year-ago value to $124.60 million. Its adjusted funds from operations were $158.24 million and $1.54 per share, up 9.8% and 9.2% from the previous year’s quarter.

For the same quarter, the company’s adjusted EBITDA came in at $211.92 million, up 7.1% year-over-year. Its free cash flow for the period increased 22.4% from the year-ago value to $138.68 million.

For the quarter ended June 30, 2024, LAMR’s revenue is expected to increase 4.4% year-over-year to $565.03 million. Its FFO for fiscal 2024 is expected to increase 10.6% year-over-year to $8.32. Over the past nine months, LAMR’s stock has gained 25.4% to close the last trading session at $115.56.

LAMR has an overall B rating, equating to a Buy in our proprietary rating system. LAMR also has a B grade for Stability, Momentum, and Quality. It is ranked #7 in the same industry. 

To see additional POWR Ratings for Value, Sentiment, and Growth, click here.

Stock #1: Gaming and Leisure Properties, Inc. (GLPI)

GLPI acquires, finances, and owns real estate properties leased to gaming operators under triple-net lease arrangements, where tenants are responsible for facility maintenance, insurance, taxes, utilities, and other services necessary for the leased properties and the businesses conducted on them.

On July 12, 2024, GLPI announced that it had entered into a binding term sheet with Bally’s Corporation (BALY), pursuant to which the Company plans to acquire the real estate assets of BALY’s Kansas City Casino, BALY’s Shreveport Casino & Hotel, and the land under BALY’s permanent Chicago casino.

Additionally, it will provide construction financing for BALY’s Chicago Casino Resort, with a total investment of about $1.59 trillion, offering an initial cash yield of 8.3%.

GLPI pays a $3.04 per share dividend annually, which translates to a 6.05% yield on the current share price. Its four-year dividend yield is 6.20%. The company’s dividend payouts have grown at a CAGR of 5.8% over the past three years.

In terms of the trailing-12-month gross profit margin, GLPI’s 96.53% is 46.6% higher than the 65.84% industry average. Its 52.39% trailing-12-month net income margin is 434% higher than the 9.81% industry average. Likewise, the stock’s 6.61% trailing-12-month ROTA is 353% higher than the 1.46% industry average.

GLPI’s total income from real estate for the fiscal second quarter that ended June 30, 2024, increased 6.5% year-over-year to $380.63 million. Net income attributable to common shareholders and earnings per share stood at $208.25 million and $0.77, up 33.8% and 30.5% year-over-year, respectively.

For the third quarter ending September 2024, GLPI’s revenue is expected to increase 7% year-over-year to $384.83 million. Its FFO for the same quarter is expected to increase 3.3% year-over-year to $0.97. GLPI surpassed the consensus revenue estimates in each of the trailing four quarters. 

GLPI gained 13.8% over the past three months to close its last trading session at $49.49.

It’s no surprise that GLPI has an overall rating of B, which translates to Buy in our POWR Ratings system.

GLPI has a B grade for Momentum, Sentiment, Quality, and Stability. It is ranked #2 in the same industry.

For additional GLPI’s Growth and Value, click here.

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AMT shares were trading at $228.78 per share on Monday afternoon, down $5.86 (-2.50%). Year-to-date, AMT has gained 7.81%, versus a 9.68% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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