Exploring Wealth-Creating REITs with Strong Track Records
Real estate investing has long been a pathway to wealth creation, with property values and rental rates consistently outpacing inflation. While the idea of investing in real estate may seem daunting to some, the creation of real estate investment trusts (REITs) in 1960 opened the doors to this lucrative market for everyone. REITs own income-producing real estate and have proven to be wealth-creating machines over the years. In fact, they have outperformed stocks, delivering an average annual return of 11.9% from 1972 to 2021, compared to 10.7% for the S&P 500. With the potential for significant returns, let’s take a closer look at three REITs that could help you become a future millionaire.
Realty Income: Building Wealth One Dividend at a Time
Realty Income (O 1.12%) has a track record of enriching its investors since its public market listing in 1994. With a compound annual return of 13.4%, Realty Income has consistently delivered attractive returns. One of the key drivers behind its success is its steadily growing dividend. The REIT has increased its monthly dividend 122 times since going public, with a compound annual growth rate of 4.3%. Realty Income has become one of the largest REITs through strategic acquisitions and mergers with other REITs. Its recent agreement to acquire rival REIT Spirit Realty in a $9.3 billion deal will further solidify its position as the fourth-largest REIT. With a massive growth runway ahead, Realty Income has the potential to continue its impressive earnings growth and deliver attractive total returns over the long term.
Equity Lifestyle Properties: Off the Beaten Path to Real Estate Riches
Equity Lifestyle Properties (ELS 0.52%) has been a standout performer, delivering a staggering 6,630% total return since its initial public offering in 1993. This outpaces the S&P 500’s total return of 1,620% during the same period. The company’s portfolio has grown from 41 properties to 449, consisting of manufactured home communities, RV parks, and marinas. This expansion has fueled income growth, while limited competition in its markets has driven above-average earnings and dividend growth. With robust demand and limited new supply, Equity Lifestyle is well-positioned for continued growth. The company’s ability to acquire properties from smaller operators further enhances its growth prospects. With a history of above-average growth and a promising future, Equity Lifestyle Properties offers an opportunity for investors to build wealth in the real estate market.
Prologis: A Fast-Growing Real Estate Behemoth
Prologis (PLD 0.41%) is the undisputed leader among industrial REITs and has consistently delivered above-average growth. Over the last five years, the company has achieved a 12% compound annual growth rate in core funds from operations (FFO) and dividends per share, surpassing both the REIT sector average and the S&P 500’s growth rate. Prologis expects to continue this strong growth with an estimated 8% to 10% annual net operating income growth from its existing portfolio. The company also has ample land for future development, with the potential to build an additional $38 billion worth of logistics properties. Prologis has demonstrated its ability to make value-enhancing acquisitions, such as the purchase of rival Duke Realty for $23 billion. With a 3.1% dividend yield and a strong growth outlook, Prologis offers investors the opportunity to generate significant returns.
Conclusion:
Real estate investment trusts (REITs) have proven to be a reliable avenue for wealth creation, consistently outperforming the stock market over the long term. Realty Income, Equity Lifestyle Properties, and Prologis are three REITs that have a track record of delivering strong returns and have the potential to turn long-term, consistent investors into millionaires. With their attractive dividend growth, strategic acquisitions, and promising growth prospects, these REITs offer investors an opportunity to participate in the wealth-creating potential of the real estate market. As always, investors should conduct thorough research and consult with financial professionals before making any investment decisions.
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