HH Top 3 U.S. REITs For The Rest Of 2020 And Beyond

The tax structure behind REITs is designed for the business to distribute the largest part of their profit to shareholders (unit holders). For many, Real Estate is the definition of stability in the investing world.

However, one must be careful about which type of Real Estate you choose. Classic retailers are under significant pressure and many shopping malls have and will deal with bankrupt tenants. Industrial REITs including warehouses, distribution centers, data centers, and cell towers are likely going to do well as they are supported by e-commerce and the internet. This is obviously a sector where you can invest 30% of your portfolio and still achieve a great diversification within the various sub-sectors.

This sounds like a sound plan for income-seeking investors.

For Retail REITs, I would pass. Most of them slowed down in 2019 due to the e-commerce trend. This trend will not stop in 2020… far from it. I’m more interested in apartment REITs.

That being said, one must make sure the REIT chosen will not only be able to sustain its dividend payment, but also to increase it. This is why I’ve built this US REITs ranking. This top three should give you the guidelines you need to select the right REIT for your portfolio.

3. The Cannabis REIT

  • Company Name: Innovative Industrial Properties
  • Ticker: IIPR
  • Dividend Yield: 3.65%
  • Dividend growth since: 2017
  • Distribution: Quarterly

Business Model

IIPR is a real estate investment trust engaged in the acquisition, ownership, and management of specialized industrial properties leased to state-licensed operators for their regulated medical-use cannabis facilities. It conducts its business through a traditional umbrella partnership real estate investment trust, or UPREIT structure, in which properties are owned by Operating Partnership, directly or through subsidiaries. The company faces competition from a diverse mix of market participants, including but not limited to, other companies with similar business models, independent investors, hedge funds, and other real estate investors, hard money lenders, and cannabis operators.

Investment Thesis

The cannabis industry is developing fast these days, but it’s not done without hiccups. A good way to enjoy part of this potential is to go through a REIT specialized in medical licensed marijuana growers. You won’t get the full hype (as compared to a grower), but IIPR is definitely looking to grow and fast. In the first 11 months of 2019, the REIT acquired 30 properties, and it keeps growing at a very fast pace. Both funds from operation (FFO) and dividend are following the same trend recently.

As for the units, Innovative Industrial Properties is currently fully rented and also grows through acquisition. Finally, it wouldn’t be a surprise to see more U.S. states legalizing marijuana. This could result in more growth potential for the REIT.

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