Back to top

Image: Bigstock

Record-Low Treasury Yields to Drive REIT Stocks: 5 Picks

Read MoreHide Full Article

Coronavirus fears wiped out $1.7 trillion from the U.S. stock market in just about two days. Stocks continued to spiral down amid concerns that the outbreak could further disrupt global economic growth.

The virus has started to spread beyond China. In fact, Italy has reported a rise in death count, while South Korea confirmed the death of 11 persons. South Korea reported 1,146 cases of coronavirus. Al Jazeera's Rob McBride, who is in Seoul, said that the virus has changed the way people live their lives, and that the country is going through extraordinary times. Globally, a minimum of 80,000 people have been diagnosed with the disease.

Investors, thus, are now taking money out of riskier assets and taking shelter in the most safe-haven asset in the world — U.S. Treasuries. And as investors have started to pour money into U.S. treasuries, its prices have started to go up and yields have begun to decline.

In fact, the 10-year Treasury yield hit an all-time low on Feb 25. It fell as low as 1.31% and breached its previous record low of 1.325% set in June 2016, according to Tradeweb data show. The 30-year Treasury yield, by the way, had slipped to an all-time low at the end of last week.

The U.S. stock market, in the meanwhile, added to their selloff on Feb 25, a day after its biggest percentage loss in more than two years. On Feb 24, the Dow, the S&P 500 and the Nasdaq each declined at least 3%, per Dow Jones Market Data. The S&P 500, in particular, breached its 50-day moving average for the first time since last October.

What’s more, all sectors of the broader S&P 500 index ended in the red. And when it comes to the blue-chip index, the Dow saw the third-biggest one-day drop in its 124-year history. All 30 Dow components finished in the negative territory. In fact, Monday’s downturn had wiped out the Dow and S&P 500’s gains in 2020.

Nonetheless, with bond yields stuck at record-low levels, income-seeking investors are widely expected to turn focus to a different corner of the market — stocks of real-estate investment trusts (REITs). This is because the high-yielding REITs now look more alluring with the slump in Treasury yields. Thus, investing in the best REIT stocks for now seems judicious. Moreover, REITs usually have attractive yields as they are required to distribute nearly 90% of their taxable income every year as dividends to shareholders due to the special tax treatment they receive.

And REIT stocks’ healthy yields indicate their large customer base, sustainable business model, long track of profitability and strong liquidity, which make them less susceptible to market gyrations.

5 Top REIT Stocks for Your Portfolio

Given the aforesaid positives, we have highlighted five of the best REIT stocks that should make meaningful additions to your portfolio. These stocks also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

AGNC Investment Corp. (AGNC - Free Report) possesses a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has risen 8.7% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 7.8% and 4.6%, respectively.

Granite Point Mortgage Trust Inc. (GPMT - Free Report) has a Zacks Rank #2. The Zacks Consensus Estimate for its next-year earnings has moved up 2% over the past 60 days. The company’s expected earnings growth rate for the next quarter and year is 5.6% and 4.8%, respectively.

Annaly Capital Management, Inc. (NLY - Free Report) has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has climbed 2.9% over the past 60 days. The company’s expected earnings growth rate for the next quarter and current year is 4% and 6%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

NexPoint Residential Trust, Inc. (NXRT - Free Report) has a Zacks Rank #2. The Zacks Consensus Estimate for its next-year earnings has moved 0.4% north over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 18.9% and 17.7%, respectively.

Apartment Investment and Management Company (AIV - Free Report) has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 1.5% up over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 6.6% and 7.2%, respectively.

By the way, AGNC Investment, Granite Point Mortgage Trust, Annaly Capital Management, NexPoint Residential Trust and Apartment Investment and Management Company have a dividend yield of 10.1%, 9.2%, 11.85%, 2.48% and 2.99%, respectively.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?

Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

Access Zacks Top 10 Stocks for 2020 today >>