REIT stocks had a terrible performance in 2022 as interest rates rose. The Global X Superdividend REIT ETF crashed by more than 21% while the S&P 500 index dropped by 18%.

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This decline invalidated the theory that REITs are a good inflation hedge, as I wrote in this article. With interest rates expected to remain at an elevated level, real estate stocks may underperform in 2023. Here are some of the best REIT shares to buy in 2023.

Prologis 

Prologis (PLD) is one of the biggest REIT companies with a market cap of over $106.3 billion. The firm focuses on the logistics industry. As such, its biggest customers are companies like DHL, FedEx, Geodis, and Amazon among others. It owns over 4,900 buildings in North America, Asia, Americas, and the United States.

Prologis business did well in 2022. Its revenue in the third quarter rose from $1.27 billion in Q3’21 to Q3’22. Its net income jumped from over $723 million to over $1 billion. Despite this, the Prologis stock price had a total return of minus 30%.

This performance happened amid rising concerns about supply chains and a slowdown in e-commerce and globalization. Still, the company is a good investment because its valuation is more attractive now and the firm has more tailwinds such as a rebound in trade. It has a forward PE ratio of 2.78% and a healthy payout ratio of 55%. 

Realty Income 

Realty Income (O) is another best REIT stock to buy in 2023. It is a major commercial REIT that has a market cap of over $40 billion. The company’s stock dropped by 6.3%, meaning that it outperformed the broader REIT market. It is a dividend aristocrat, meaning that it has grown its dividends in the past 25 years straight, as I wrote here.

Realty Income focuses on retail and industrial companies. Some of the biggest customers are Lowe’s, Chipotle, and 7-Eleven. The stock did well as the company’s revenue surged from $1.2 billion in 2017 to over $2 billion in 2021. Its revenue rose from $489 million in Q3’21 to $836 million in Q3’22. 

This revenue is expected to keep growing in 2023. It also has a solid track record of delivering monthly dividends. Its dividend yield is 4.63%. 

National Retail Properties 

National Retail Properties (NNN) is a small REIT stock with over $8.22 billion in market cap. The firm’s top tenants are companies in convenience stores, automotive, restaurant, and family entertainment among others. Some of its biggest tenants are 7-Eleven, Mister Car Wash, and Camping World.

The company’s revenue rose from $180 million in Q3’21 to $193 million in Q3’22. NNN stock price rose by more than 10% in 2022. It has a dividend yield of 4.78%. Therefore, a combination of a retail rebound, a 99% occupancy rate, and higher dividends make it a solid investment.

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