In 2022, in the case of increased market uncertainty, real estate stocks may become the first choice. They tend to offer higher dividend yields, better value, strong growth rates and robust profitability.As the investment target of real estate derivatives, REITs (real estate investment trust) can also be used as a hedge against inflation and helps to reduce the inherent portfolio risk of real estate or real estate stocks.

When interest rates rise, especially in the current environment, REITs can provide long-term and stable returns.Many REITs have been shown to be resilient, hedging against inflation and generating income as property-related prices rise.

Invest in REITs to fight inflation and rising interest rates, with a better rate of return

The correction in US stocks at the beginning of the year was mainly driven by two main factors: the Fed's expectation of raising interest rates and high inflation.

While many investors are aware of the inflation hedging nature of real estate, the prevailing view is that REITs does not perform well when interest rates rise, but in fact, REITs tends to perform well during periods of high inflation and rising interest rates.

As the chart above shows, REITs (VNQ) (Purple Line) has outperformed the SPY, QQQ and DIA so far this year.

The main reason is that rents tend to rise much faster than REITs's debt costs. In addition, real estate investment trusts almost always take steps to lock in mortgage rates for as long as possible when interest rates are low so that they can withstand periods of higher interest rates.

In other words, when interest rates rise, the negative impact on most REITs is limited, while the positive impact of rent increases is maximized.

As you can clearly see from the chart below, REITs has outperformed stocks (SPY) in most periods of rising interest rates:

There are at least three main reasons why real estate can make a profit in the face of high inflation:

1. In the period when prices are rising rapidly, construction costs rise. This increases the replacement value of existing properties, which often increases their market value.

2. Higher construction costs will also lead to a corresponding increase in rents.

3. Higher inflation tends to lead to higher wages, which translates into higher incomes, which in turn leads to the ability of all types of real estate tenants to pay higher rents.

Of course, excessive inflation tends to erode consumers' real purchasing power, which in turn limits rent growth. That's why moderate inflation is the ideal environment to get the most out of real estate:

Several of the most worthwhile real estate investment trusts

According to a research report by the head of strategy at SeekingAlpha, he singled out the following three most worthwhile REITs, which closed as of April 22:

1、$Essential Properties Realty Trust, Inc. (EPRT.US) $

• Market capitalization: $3.361 billion

• Dividend yield: 4.08%

Essential Properties Realty Trust is a real estate company engaged in the ownership, acquisition and management of single-tenant properties. EPRT specializes in providing long-term net leases for mid-market companies in service and experience industries. In addition to rent, net leases require tenants to pay some or all of the taxes, fees and maintenance costs related to the property; EPRT charges rent and mailing fees.

Some well-known brands in EPRT's portfolio include restaurant chains such as Taco Bell, McDonald's Corp and Arby's, as well as companies such as Marriott, Circle K and Cinemark.

2、$W.P.Carey (WPC.US) $

• Market capitalization: $15.923 billion

• Dividend yield: 5.17%

WP Carey Inc. SeekingAlpha is very optimistic and is expected to become the largest net leased real estate investment trust, investing in state-of-the-art single-tenant warehouses, offices, retail and self-service storage units. WPC's properties include 1215 net leases with an annual rental income of about $1.2 billion, 352 tenants, an occupancy rate of 98.5 per cent and a rent increase of 99 per cent.

With nearly half of its rental income coming from industry and logistics, WPC benefits from the supply chain headwinds that other industries are experiencing. Therefore, SeekingAlphpa believes that this is a low-risk investment compared to other industries.

3、$Life Storage, Inc. (LSI.US) $

• Market capitalization: $12.249 billion

• Dividend yield: 2.77%

Life Storage,Inc. Is a real estate investment trust company engaged in the acquisition, ownership and management of self-service warehousing properties. It provides commercial, vehicle and wine storage services.

Self-service storage has the advantages of low capital and low operating expenses, increasing cash flow and strong operating profit margin. The company has more than 1000 locations in the United States and Canada. The rapid development of e-commerce has driven the demand for warehouses and for product storage and technology industry servers. Supply chain and labor shortages have led to high occupancy rates and rents of warehousing properties, which is why Life Storage has a growth advantage over many other REITs.

In addition, some Wall Street analysts also recommend$Brixmor Property Group (BRX.US) $和$VICI Properties (VICI.US) $。

BRX is the main open-air shopping mall, and about 70% of the company's properties are owned by$Kroger (KR.US) $、 Publix 、$KONINKLIJKE AHOLD DELHAIZE NV SPON ADR EACH REP 1 ORD SHS (POST SPLIT) (ADRNY.US) $(e.g. Food Lion, Giant, Stop & Shop) and$Alberson (ACI.US) $Waiting for the American grocery store to rent.

VICI is the leader of the gaming REITs, which owns iconic Las Vegas resorts such as Caesar Palace and the Venetian, and previously successfully acquired MGM development properties.$MGM Growth Properties LLC (MGP.US) $。

Do you think REITs is a product worth investing in?

In addition to the REITs mentioned above, what other REITs do you like?

You are welcome to leave your wonderful views in the comments area.