Armada Hoffler Properties, Public Storage, and Alexandria Equities are the 3 Best REIT (real estate investment trust) Stocks to Buy in May 2024, according to analysts. We used the TipRanks Stock Screener tool to select these three stocks with above-industry average dividend yields, “Strong Buy” consensus rating, and reasonable upside potential in the next twelve months.
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As per regulations, REITs are expected to pay at least 90% of their taxable income as dividends to shareholders. There are several types of REITs under three main categories – equity REITs, mortgage REITs, and hybrid REITs. Without much ado, let’s study the three REIT stocks.
#1 Armada Hoffler Properties (NYSE:AHH)
Armada Hoffler is a vertically integrated REIT focused on high-quality multifamily, office, and retail properties, located mainly in the Mid-Atlantic and Southeastern U.S. regions. AHH pays a quarterly dividend of $0.20 per share, reflecting an attractive yield of 6.92%.
In Q1 FY24, Armada Hoffler reported diluted earnings per share (EPS) of $0.17, significantly higher than the prior year period’s figure of $0.03 and beating the consensus estimate of a loss of $0.10 per share. Also, total revenues jumped 34.2% year-over-year to $193.48 million, exceeding the consensus with a wide margin.
Importantly, normalized FFO (funds from operations) rose 10% year-over-year to $0.33 per share. Further, AHH maintained its full-year Fiscal 2024 normalized FFO guidance range of $1.21 to $1.27 per share. FFO is considered one of the best gauges to measure a REIT’s operating performance.
What is the Price Target for AHH?
On TipRanks, the average Armada Hoffler Properties price target of $14.33 implies 24.7% upside potential from current levels. With three unanimous Buy ratings, AHH stock has a Strong Buy consensus rating. Year to date, AHH shares have lost 7.6%.
#2 Public Storage (NYSE:PSA)
California-based Public Storage claims to be the largest owner, operator, and developer of self-storage facilities in the world. It has more than 2,900 facilities in the U.S., serving nearly two million customers. PSA pays a regular quarterly dividend of $3 per share, carrying a current yield of 4.2%.
In Q1 FY24, PSA posted EPS of $2.60, beating the consensus handily but down 1.9% compared to the prior-year period. A higher interest expense and a rise in depreciation and amortization expense weighed on the first-quarter bottom line.
Meanwhile, revenues of $1.16 billion rose 5.8% year-over-year and came in marginally above the consensus. However, core FFO of $4.03 per share declined 1.2% compared to Q1 FY23.
Is PSA a Good Stock?
With seven Buys versus one Hold rating, PSA stock commands a Strong Buy consensus rating on TipRanks. The average Public Storage price target of $318.13 implies 12.4% upside potential from current levels. PSA shares have lost 9.2% so far in 2024.
#3 Alexandria Real Estate Equities (NYSE:ARE)
Alexandria Real Estate Equities is a unique REIT, focused on the niche segment of life science real estate. It owns, operates, and develops collaborative life science mega campuses in the top innovation cluster locations in North America. ARE pays a regular quarterly dividend of $1.27 per share, representing a yield of 4.06%.
In Q1 FY24, ARE posted better-than-expected diluted EPS of $0.97, up by an impressive 120.5% compared to the prior-year period. Similarly, total revenues grew 9.7% year-over-year to $769.1 million, which also outpaced the consensus. Moreover, adjusted FFO rose 7.3% year-over-year to $2.35 per share. ARE also revised its outlook for FY24, forecasting higher EPS in the range of $3.60 to $3.72. Also, it slightly revised its projected adjusted FFO outlook to the range of $9.41 to $9.53 per share from the previous guidance of $9.37 to $9.57.
Is Alexandria Real Estate a Buy?
With five unanimous Buy ratings, ARE stock has a Strong Buy consensus rating on TipRanks. The average Alexandria Real Estate Equities price target of $141 implies 14.8% upside potential from current levels. ARE shares have lost 5.1% so far this year.
Ending Thoughts
The current scenario for REITs remains a tad bit dull owing to an uncertain macro environment. Even so, analysts are highly optimistic about the three REIT stocks discussed above. Investors can consider investing in REIT stocks to gain exposure to the real estate sector without having to invest large sums in the actual properties.
