REITs could be set to grow in 2024 thanks to potential interest rate cuts and strong performance in healthcare, industrial, and data center properties. They're a solid choice for passive income, with high occupancy rates, ongoing tenant demand, and rising rents in key asset types.
Hence, investors looking for reliable passive income could consider investing in Simon Property Group, Inc. (SPG), Lamar Advertising Company (LAMR), and Gaming and Leisure Properties, Inc. (GLPI) this June.
REITs are reliable for income, distributing at least 90% of taxable income as dividends, ensuring consistent high payouts that benefit income-oriented investors seeking wealth accumulation, reduced portfolio volatility, and inflation protection, especially for retirement savings and living expenses.
Notably, Global REIT earnings are expected to increase by over 10% in 2024 and 2025, factoring in higher property taxes, payroll costs, and interest expenses due to raised rates, as per UBS forecasts.
Retail REITs are dependable because they focus on retail properties that generate income. They can earn more from increased retail sales when consumers are confident, have more money to spend, and live in growing urban areas. Meanwhile, diversified REITs offer a way into real estate with less risk, steady income, and the chance for long-term growth in property value.
Let’s discuss the stocks mentioned above in detail.
Simon Property Group, Inc. (SPG)
SPG is a real estate investment trust engaged in the ownership of premier shopping, dining, entertainment, and mixed-use destinations, and it is an S&P 100 company. Its properties across North America, Europe, and Asia offer community gathering places for millions of people every day and generate billions in annual sales.
On May 20, 2024, SPG announced a new luxury lifestyle mixed-use development at Fashion Valley in San Diego. The development will feature 850 luxury residences and 100,000 square feet of new retail and dining spaces. This redevelopment aims to enhance Fashion Valley as a premier shopping, dining, and living destination.
SPG has paid dividends for two years. Its annual dividend is $8, which translates to a yield of 5.26% at the current share price. Its four-year average dividend yield is 5.90%. Moreover, the company’s dividend payouts have increased at a CAGR of 14.2% over the past three years.
SPG’s revenue grew at a CAGR of 8.6% over the past three years. Also, its EBIT grew at a CAGR of 14.5% over the past three years.
SPG’s trailing-12-month asset turnover ratio of 0.17x is 30.1% higher than the 0.13x industry average. The stock’s trailing-12-month Return on Common Equity of 84.94% is considerably higher than the industry average of 3.05%. Also, its trailing-12-month Return on Total Assets of 7.61% is 446.4% higher than the industry average of 1.39%.
During the first quarter that ended on March 31, 2024, SPG’s total revenue increased 6.8% year-over-year to $1.44 billion. Its lease income rose 4.4% from the year-ago value to $1.30 billion. The company’s funds from operations (FFO) of the operating partnership stood at $1.33 billion, or $3.56 per share, up 30% and 29.9% over the prior-year quarter, respectively.
Street expects SPG’s FFO for the quarter ending June 30, 2024, to increase 2.4% year-over-year to $2.95. Its revenue for fiscal 2025 is expected to rise 2.4% year-over-year to $5.53 billion. It surpassed the Street FFO estimates in three of the trailing four quarters. Over the past year, the stock has gained 36.4% to close the last trading session at $151.
SPG’s POWR Ratings reflect its strong fundamentals. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Stability, Sentiment, and Quality. Within the REITs - Retail industry, it is ranked first out of 29 stocks. To see SPG’s ratings for Growth, Value, and Momentum, click here.
Lamar Advertising Company (LAMR)
LAMR operates as an outdoor advertising company in the United States and Canada. The company owns and operates billboards, logo signs, and transit advertising displays, and rents space for advertising on billboards, buses, shelters, benches, logo plates, and airport terminals.
On May 16, 2024, LAMR announced a quarterly cash dividend of $1.30 per share, payable on June 28, 2024, to stockholders of record on June 17, 2024. They expect total quarterly distributions in 2024 to be at least $5.20 per share.
LAMR pays an annual dividend of $5.20, which translates to a yield of 4.43% at the current share price. Its four-year average dividend yield is 4.28%. Also, the company’s dividend payouts have increased at a CAGR of 30.9% over the past three years. LAMR has paid dividends for nine consecutive years.
LAMR’s net income grew at a CAGR of 27.3% over the past three years. Also, its EPS grew at a CAGR of 26.8% over the past three years.
In terms of the trailing-12-month Capex / Sales, LAMR’s 5.76% is 72.1% higher than the 3.35% industry average. Similarly, the stock’s 0.33x trailing-12-month asset turnover ratio is 150.2% higher than the 0.13x industry average. Moreover, its trailing-12-month net income margin of 23.26%x is 155.3% higher than the 9.11% industry average
LAMR’s net revenues for the first quarter that ended March 31, 2024, increased 5.7% year-over-year to $498.15 million. Its operating income grew 4.9% from the year-ago value to $124.60 million. Its adjusted funds from operations were $158.24 million and $1.54 per share, up 9.8% and 9.2% from the previous year’s quarter.
For the same quarter, the company’s adjusted EBITDA came in at $211.92 million, up 7.1% year-over-year. Its free cash flow for the period increased 22.4% from the year-ago value to $138.68 million.
For the quarter ending June 30, 2024, LAMR’s revenue is expected to increase 4.9% year-over-year to $567.49 million. Its FFO for fiscal 2024, is expected to increase 10.6% year-over-year to $8.32. Over the past nine months, LAMR’s stock has gained 34.8% to close the last trading session at $116.58.
LAMR’s bright prospects are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Stability and Quality. It is ranked #3 out of 45 stocks in the REITs - Diversified industry. To access the additional grades of LAMR for Growth, Value, Momentum, and Sentiment, click here.
Gaming and Leisure Properties, Inc. (GLPI)
GLPI acquires, finances, and owns real estate properties leased to gaming operators under triple-net lease arrangements, where tenants are responsible for facility maintenance, insurance, taxes, utilities, and other services necessary for the leased properties and the businesses conducted on them.
On May 20, 2024, GLPI announced a second quarter 2024 cash dividend of $0.76 per share, payable on June 21, 2024, to shareholders of record on June 7, 2024. This represents an increase from the previous year's second quarter dividend of $0.72 per share.
On May 16, 2024, GLPI announced the acquisition of three casino resorts in South Dakota and Nevada for $105 million, establishing a new tenant relationship with Strategic Gaming Management. The transaction is expected to be immediately accretive, with new leases providing an initial annual cash rent of $9.2 million.
GLPI acquires casino resorts, expanding its portfolio, diversifying its tenant base, solidifying its gaming industry position, and enhancing its revenue stream and financial performance through new leases.
GLPI’s annualized dividend of $3.04 per share translates to a dividend yield of 7% on the current share price. Its four-year average yield is 6.24%. Over the past three GLPI’s dividend payments have grown at CAGRs of 5.8%. GLPI has paid dividends for nine consecutive years.
GLPI’s EBITDA grew at a CAGR of 8.9% over the past three years. Likewise, its Tang Book Value and Total Assets grew at a CAGR of 16% and 9.4% during the same period.
GLPI’s 80.76% trailing-12-month AFFO payout ratio is 9.5% higher than the 73.74% industry average. Its trailing-12-month EBIT margin of 72.36% is 240.1% higher than the 21.28% industry average. In addition, the stock’s 74.47% trailing-12-month FFO to gross margin is 18.5% higher than the 62.83% industry average.
For the fiscal first quarter that ended March 31, 2024, GLPI’s total income from real estate stood at $375.96 million, up 5.8% year-over-year. Its adjusted EBITDA increased 3.2% from the prior-year quarter to $333.43 million.
The company’s adjusted funds from operations and AFFO per common share and OP units grew by 4% and remained flat, respectively, over the prior-year quarter to $258.62 million and $0.92.
Analysts expect GLPI’s revenue and FFO for the quarter ending June 30, 2024, to increase 5.7% and 15% year-over-year to $376.82 million and $0.95, respectively. GLPI surpassed the consensus revenue estimates in each of the trailing four quarters. The stock has declined 2.4% over the past month to close the last trading session at $43.20.
It’s no surprise that GLPI has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Stability and Quality and is ranked #5 in the REITS—Diversified industry. In addition to what we have stated above, we have given GLPI grades for Growth, Value, Momentum, and Sentiment. Get all the GLPI ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
SPG shares were trading at $150.97 per share on Tuesday afternoon, down $1.07 (-0.70%). Year-to-date, SPG has gained 8.62%, versus a 12.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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