Wall Street thinks these dividend-paying real estate stocks have room to rise in 2025 | Wilnesh News
Many on Wall Street say the outlook for real estate is brighter in 2025. Citi said REITs are ushering in the “dawn of a new cycle” after a tough few years. The company expects the REIT, which typically pays dividends, to post total returns of 10% to 15% by 2025 on the back of faster year-over-year earnings growth, lower supply deliveries, a solid macroeconomic backdrop and reasonable valuations. Citi analyst Nick Joseph wrote: “Compared with previous years, we believe rates will be broadly stable while fundamentals accelerate, and given the lack of new supply in the coming years, solid fundamentals are likely to Sustaining and strengthening. The iShares US Real Estate ETF (IYR), which tracks stocks in the U.S. real estate sector, has a 2024 total return of more than 8% and is trading near an all-time low relative price-to-earnings ratio, with 50% of real estate stocks yielding more than the 10-year bond. . Additionally, the share of S&P 500 real estate sectors with an S&P Quality Rating of B+ or better has doubled over the past decade to 70%, analyst Jeffrey Spector said in a Dec. 6 report. “Overall, we believe the backdrop in 2025 is favorable for REIT fundamentals,” he wrote, noting that the bank’s economics team expects healthy gross domestic product growth. “Supply is expected to decline in ’25 and may reach historic lows in ’26,” Spector added. “In addition, public REITs maintain advantages in cost of capital and access to capital compared to private owners, with stable interest rates Could provide enough visibility to drive deals, narrowing the gap between buyers and sellers One sign of potential strength in REITs comes from rising CBRE U.S. real estate transaction volumes, Janus Henderson said. The company said such growth typically bodes well for cycle turning points. Janus Portfolio Managers’ Nov. 11 report noted: “The resurgence in trading…highlights the multiple avenues for REITs to drive earnings growth, enhance the outlook for asset values and, ultimately, share price gains in the new cycle. and the potential for dividend growth. Kuhl believes 2025 will largely depend on fundamentals, which he said will help push valuations higher, although there is speculation that the Trump administration may adopt policies next year that will push inflation higher. “I think a lot of these factors are priced in in the weeks and months leading up to the election,” said Kuhl, who runs the firm’s U.S. Real Estate ETF (JRE) with Greenberg. . “His base case forecast is that 10-year Treasury yields will remain within their original range. JRE 1Y Mountain Janus Henderson U.S. Real Estate ETF “So growth, plus dividends,” he said. “If you invest in some undervalued stocks that you can pick on top of that, that’s the added return.” Where to Invest Still, not all REITs are created equal, and some areas are more beneficial than others. Citi is overweight in healthcare, residential, industrials and infrastructure, saying stock picking will continue to be a driver of alpha. It owns a model REIT portfolio that maintains overweight positions in multiple sectors. Here are some of the holdings in the portfolio. Healthcare REITs are currently a popular choice among analysts and investors. Janus Henderson believes the biggest opportunity right now is specifically in senior housing. Janus’ Kuhl explained that the aging population also presents supply issues. “Almost nothing is being built in this country for these people right now,” he said. “At the same time, a huge push in demand is very clear and about to happen. So it’s a very good story.” Welltower, which owns and develops senior housing, skilled nursing/post-acute care facilities and medical office buildings, is a focus of JRE. One of the shares. Kuhl also sees opportunities in data centers, which will benefit from the artificial intelligence boom. JRE’s largest holding is data center company Equinix. In addition to opportunities in data centers and healthcare, there is value in retail, said Steve Brown, senior portfolio manager at American Century Investments. He especially likes open-air grocery shopping malls. There’s a lot of need, but little construction, he said. “Mall occupancy rates are rising, asking rents are rising, and few stores are closing or going bankrupt,” said Brown, who manages the firm’s real estate fund (REACX). “Public companies are reasonably priced compared to other real estate sectors , because it’s still not considered a hot asset class.” He likes Regency Center and city fringe properties. He is also bullish on Simon Property Group in the shopping center segment as occupancy and rents are rising and there is no new supply. Bank of America is also overweight health care and retail. “We focus on REITs with the best earnings visibility, the highest growth prospects and rising Wall Street expectations,” Bank of America’s Specter said. “While we do believe a barbell approach is the best fit between quality and value. “, but we do like REITs with strong and flexible balance sheets that can drive external growth in 2025.” Here are some of the company’s top picks for 2025. Specter believes the company, which will go public in February, will benefit from senior housing deals as America ages. For homes, he likes American Homes 4 Rent. “We remain optimistic about AMH’s portfolio, with limited new supply of single-family homes, structural demographic tailwinds from aging millennials, value-added consolidation/development opportunities and strong management,” Specter said. “Higher mortgage rates are also a benefit for single-family rental REITs.”
