Three REITs to Store in Your Portfolio
A pullback in storage REITs presents an opportunity for yield-focused investors.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
In a falling interest rate environment, it becomes harder to find a safe investment that provides a significant yield.
As rates fall, investments that feature high yields become more attractive. But as investors pile in, the price of these investments begins to rise, which drives the yields lower.
We are seeing this effect right now in the Utilities sector, as these normally boring stocks have become a bright spot in investors’ portfolios. The sector, represented below by the SPDR Select Utilities Fund XLU, has been trending steadily higher since late last year.
Utilities are in favor, especially now that companies such as Amazon AMZN, Alphabet GOOGL, and Microsoft MSFT are investing in energy to power their data centers. But it’s tough to buy into this sector when price is near the upper end of the channel, as it is on XLU’s chart.
What if we could find some higher-yielding investments that aren’t quite so overbought? For that, investors can turn to real estate investment trusts, or REITs.
The Dow Jones All REIT Trust (REIT), a bellwether for the REIT sector, recently bounced from its 50-day moving average (blue). That moving average parallels REIT’s bullish trend line (black dotted line).
If you’re feeling wary about the current real estate market, you’re not alone. Housing prices have come down a bit, but are still near all-time highs. Mortgage rates are off their highs, but still elevated from pandemic levels.
However, not every REIT revolves around the housing market. Storage facilities can also qualify as REITs.
For example, Public Storage PSA, which currently yields 3.47%, has gained about 33% since May 1. Public Storage has pulled back to its 50-day moving average (blue), so investors have an opportunity to initiate a position in this REIT while it’s off its highs.
Public Storage is due to report earnings on October 29.
Salt Lake City-based Extra Space Storage EXR currently yields 3.81%. While this name has a slightly higher yield than Public Storage, it also has a weaker chart, as Extra Space is trading below its 50-day moving average (blue).
Extra Space Storage is scheduled to report earnings on October 29.
CubeSmart CUBE boasts a yield of 4.09%. Like the other names presented today, CubeSmart is off its highs, having dropped by 9.4% over the past month. Like EXR, CUBE has fallen below its 50-day moving average.
CubeSmart is schedule to report earnings on October 31.
If I had to choose one name from this group, it would be Public Storage. PSA has 3,300 locations across the U.S. It has the strongest chart and the largest market cap of this group.
At the time of publication, Ponsi was long PSA.
