3 Top Real Estate Stocks to Buy in November

The holiday season is approaching. Now is a good time to buy stocks that you think will help you meet your financial goals for the next few years. I’m not talking about go-go growth stocks. Let’s look at something more mundane: a real estate stock that pays you dividends while letting someone else manage the property.

A real estate investment trust (REIT) is just that kind of passive income machine. They have a long track record of delivering solid total returns and join fixed income as a popular choice for conservative investments in long-term portfolios.

A Diverse Trio for Reliable Dividends

I own 20 REITs and my current 3 favorites are agree (ADC 0.51%), Getty real estate (GTY 0.61%)When Gladstone commercial (good -0.74%)Agree focuses on retail facilities, especially large retailers, while Getty leases to auto-related businesses such as gas stations and parts stores. Gladstone owns a mix of industrial and office properties.

Each of these REITs has its own proven strategy that makes it an attractive investment. Agree, for example, has maintained near 100% occupancy of its facilities and grown its portfolio and revenue at a record pace during tough times for brick-and-mortar retailers.

Getty, on the other hand, sits in a niche market that is particularly recession-proof and inflation-proof. People will continue to buy gas, and a combination of sales-leaseback arrangements, new property developments, and redevelopments will give them the flexibility to take advantage of opportunities when they arise.

Gladstone is also part of the REIT Group chaired by David Gladstone. David Gladstone manages his holdings with the goal of providing a stable monthly retirement income. Meanwhile, Gladstone’s commercials focus more on industrial real estate than his struggling office spaces business. The CEO recently said all 15 of his upcoming acquisitions are in the hot spot.

Gladstone has been paying dividends monthly since its initial public offering in 2003, Agree started paying monthly last year, and Getty still pays quarterly. The chart below shows how these three trusts performed against the benchmark. Vanguard Real Estate ETF Total return over the last 10 years.

ADC total return level data by YCharts.

Dividends make up the majority of that total return. After all, REITs are required by tax law to pay at least 90% of their taxable income to their shareholders. The chart below shows the stable dividend yield each of these REITs offered to shareholders over the same decade.

ADC dividend yield data by YCharts.

Meanwhile, as you can see below, companies, especially Agree, have steadily increased their funds from operations (FFO, a key measure of REIT earnings). Their payout percentage is at a level that can support more dividend growth and acquisitions in their portfolio. Currently, based on cash flow, Agree is 82%, Gladstone is 80%, and Getty is 70%.

ADC Funds from Operations (TTM) data by YCharts.

In terms of growth, just last quarter Agree added 121 net-leased properties, offering a portfolio of over 1,700 locations in all 48 contiguous states. Getty has invested in 10 properties in Q3 2022, and in 38 states he owns 1,021 properties. Gladstone has 136 properties across 27 states, with the addition of four industrial properties and the sale of three office properties in the third quarter.

Attractive price for buy and hold in November

It may also be on sale at a bargain price right now. Of the three companies, Agree has the highest price to FFO per share ratio, at a reasonable 17x. On the other hand, Getty is about 11 times, and Gladstone is about 10 times.

For example, Agree’s share price rose about 9.5% last month, Getty’s about 17.3%, and Gladstone’s about 19%. But they’re still down this year, with about 6% in favor, Getty at about 1%, and Gladstone at a relatively whopping 28%.

Each of them has their own balance sheet and tendencies towards payments, and I am sure I will be grateful to have them in my investment portfolio for years to come.