Kevin Brown, senior Morningstar analyst, suggests that investors should own real estate investment trusts in light of the broader concern about a possible US recession.
In a recent CNBC interview, he stated that “Real Estate is showing as a positive because of the drop in 10-year Treasury yield.”
Investors can benefit from REITs’ healthy dividend yields, which are a good reason to buy them before a possible economic downturn.
The Morningstar analyst has a bullish outlook for two of the real estate investment trusts in particular: Realty Income, and Healthpeak Properties.
Realty Income Corp. (NYSE:O)
Kevin Brown suggests investing in Realty Income before a possible recession, because the company is a Dividend Aristocrat. This means that it has raised its dividend every year since the beginning of the millennium.
Realty Income has survived the COVID Pandemic and global financial crises without cutting its dividend. Morningstar’s analyst believes that this is unlikely to change.
In a Friday research note, Brown told his clients that he remains optimistic about Realty Income, as the stock is trading at up to a 25% discount to its true value.
Realty Income has notable tenants like 7-Eleven, Dollar General and Dollar General. The San Diego REIT posted a better than expected revenue in Q4 of $1.34billion, even though the consensus EPS was only a penny below.
Realty Income currently offers a dividend yield of 5.68 percent. The “O” stock is up almost 10% from its low for the year to date in January.
Healthpeak Properties Inc (NYSE: DOC)
Kevin Brown calls Healthpeak Properties a great investment for 2025, as REITs in the health care sector have performed well over recent years. They are expected to continue this momentum.
In a report, he said that the industry has seen a very significant growth since the Pandemic. The boomer generation is now the main target for this sector.
Hayden Research Campus, Baylor University Medical Center in Dallas and other prominent names are included on the list of tenants.
Morningstar’s equity analyst suggested buying Healthpeak Properties on Friday at the current price, as the demand for laboratory space by pharmaceutical companies is likely to remain constant even if US economic conditions deteriorate.
He added that “Healthpeak offers stable growth in NOI, which is not exciting. But when other sectors look at the decelerating growth of NOI, then stable starts to appear attractive.”
DOC has a current dividend yield of 5.96%, which is even higher than the average. Brown added that the stock is also flat year-to-date at this time, making the valuation attractive.
The post Two REITs that stand out in the face of recession: Here’s Why may change as new information becomes available.
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