Patterns exist everywhere. In uncertain economic conditions, typical patterns will usually fall into place. However, the current conditions point to a recession. But, this is because a recession usually comes on the heels of considerable jumps in the interest rate. A leap in interest rates often leads to a drop in real estate sales. Interest rate hikes also slow down automobile sales and credit card spending. These things combine to create a recession. First, however, let’s explore the top three retail REITs that analysts upgraded during the recent recession.
Online Shopping Also Hurts
Conventional wisdom points to an influx of online shopping, reducing local brick-and-mortar business sales when things get tight, and budgets are necessary. Because of this, real estate investment trusts (REITs) that focus on retail outlets would feel the pinch and see huge drops in sales and revenues. However, there are Wall Street analysts who see beyond the fears that form during a recession. To prove the point that REITs can weather recessionary storms, Wall Street analysts have singled out three retail REITs that have, so far, suffered only a trace negative impact.
The Big Three
According to the experts on Wall Street, these are the three REITs to watch. For example, the REITs include National Retail Properties Inc., Regency Centers Corp., and Brixmor Property Group. Here is a closer look at each and details on what makes them so significant in the eyes of Wall Street analysts.
National Retail Properties Inc. (NYSE: NNN)
National Retail Properties Inc. is a net-lease REIT that owns a diverse group of 3,349 properties within 48 states. In addition, the company has a collection of “stable, well-known” brand names under its REIT belt. They include such chains as Chuck E. Cheese, BJ’s Wholesale Club, Sunoco LP, 7-Eleven, Camping World Holdings, and Best Buy Co., to name a few.
Another unique characteristic that makes National Retail Properties Inc. unique is that they have produced annual dividend increases for the past 33 consecutive years. The current annual dividend sits at $2.20 and has a yield of 4.7 percent. In addition, forward funds from operations (FFO) of $3.13 covers the dividend and feature a payout ratio of 70 percent.
According to their Q3 operating results, the company has a 99.4 percent occupancy rate on its properties and a weighted average of 10.4 years in remaining lease terms. Investors will find all these data points attractive and should not be affected by a recession this year. In addition, to give you an idea of the confidence analysts have in National Retail Properties Inc., the company upgraded from Hold and Buy on January 3, 2023.
Regency Centers Corp. (NASDAQ: REG)
Regency Centers Corp. is a Jacksonville, Florida-based company. The company’s description includes a “self-managed retail REIT” that buys, builds, and manages shopping centers. As a result, most of them have a well-known grocery chain as the anchor. Regency Centers Corp. has 398 properties with more than 8 thousand tenants giving the company an occupancy rate of 94.7 percent as recorded in Q3.
The quarterly dividend from Regency Centers Corp. went up recently to $0.65 from $0.625. The annual dividend of $2.60 currently yields 4.1 percent and is covered by an FFO of $4.02. In addition, the company was upgraded from Neutral to Overweight on December 12, 2022.
Brixmor Property Group Inc. (NYSE: BRX)
Brixmor Property Group Inc. is a retail REIT based in New York and owns and operates 378 properties. Their properties are open-air shopping centers with well over 5 thousand retailers, including well-known, stable brands. These include Kroger Co., TJX Companies, Ross Stores, and Publix Super Markets Inc. In addition, as shared by Pharma Property Group, there are opportunities to purchase a Walgreens franchise.
The Brixmor Property Group Inc. quarterly dividend increased to $0.26 from $0.24 recently. In addition, the annual dividend of $1.04 of $1.96 yields 4.6 percent and is covered by FFO. The payout ratio sits at 53 percent. The company was upgraded from Peer Perform to Outperform on December 12, 2022.
Although the analysts who have singled out these three REITs as worthy of attention from investors work on Wall Street, there are disclaimers to consider. First, the analysts are only sometimes correct. They may have an interesting perspective, but investors should do their homework to assist with making informed decisions. Plus, it is interesting that the analysts upgraded certain REITs that have had difficulties over the past calendar year. Finally, it could be a positive sign that the Wall Street experts feel these REITs have made it through the worst of the projected recession of 2023.