10 Best REITs To Combat Inflation (& Alternate Investment Ideas)

Real Estate Investment Trusts (REITs) were created by Wall Street professionals in the 1970s to allow anyone to easily make an investment in real estate without having to buy property.

Companies that fall into REITs own, operate, or bankroll real estate properties and generate rental income. 

Investors profit from these real estate assets by earning dividends. This makes REITs a lucrative fixed income stream, especially in times of rising inflation.

You can purchase REITs stocks through an Exchange Traded Fund (ETF) or a mutual fund.

This article will explore why REITs are a good investment during high inflation, the benefits of opting for a REIT, and some of the best REITs. We’ll also cover other investment vehicles that can help you combat inflation better, including wine investing and how Vinovest can help you start your own wine portfolio. 

Are REITs a Good Investment During Inflation?

A Real Estate Investment Trust makes a great inflation hedge with excellent yields.

In the past 20 years, REITs dividends have generally increased (with very few exceptions), providing inflation protection as measured by the Consumer Price Index. 

REITs remain relatively unaffected by the rising inflation and interest rate levels (caused by the Federal Reserve rising rates of short-term interest.) That’s because: 

• The demand for residential and commercial real estate grows even during high inflation. This supports REIT dividend growth and makes it a stable fixed income in an inflationary period. 
• REITs don’t have to pay corporate income taxes so long as they pay out at least 90% of their net income to shareholders. 
• REITs can make increased payouts because they take the proceeds from property sales and reinvests in buying new property. So, during an inflationary period, this produces taxable income mainly distributed to shareholders in the form of dividends (which they usually hold in non-taxable accounts like 401K and Roth IRA.) 

10 Best REITs For Inflation

Commercial real estate is the third largest asset class in the US and is flourishing despite the two-year pandemic. Real estate rent and occupancy rates are increasing, particularly for malls, industrial, and office REITs.

Over 40 countries and emerging markets have set up a REIT-based investment model to access an index of income producing real estate. 

Let’s take a closer look at the most outstanding REITs to invest in during higher inflation:

• Mall REITs
• Office REITs
• Industrial REITs
• Other REITs

Mall REITs 

Retail or mall REITs include outlet centers, power centers, shopping malls, and freestanding retail properties. 

These are the REIT stocks to keep your eye on:

1. Simon Property Group

The Simon Property Group owns and finances premier dining, shopping, and entertainment properties. It’s also the country’s largest mall operator and has 234 properties in North America, Europe, and Asia. 

In the last couple of years, the Group faced difficulties due to Covid’s impact on the sector. In 2020, its stock dipped to 38% but bounced back in 2021 when stocks rose to 95%. 

The Group also bought over big retailers, like Brooks Brothers, who couldn’t sustain themselves during the pandemic. 

Vital indicators:

• Dividend Yield: 7.11%
• P/E Ratio: 14.12
• Revenue: 1.30B

2. Realty Income

Realty Income is a REIT that focuses on single-tenant commercial properties in the USA, UK, and Spain. The company’s most prominent tenants include Walgreens, Walmart/Sam’s Club, and Sainbury’s. 

At the end of 2021, Realty Income increased its monthly dividend by 4.2%. This REIT can make regular payments primarily because its rental income comes from financially stable tenants who sign triple net leases and pay monthly bills. 

Additionally, the average lease term for tenants is 8.8 years, ensuring the company has steady cash flow for an extended period.

Vital indicators:

• Dividend Yield: 4.72%
• P/E Ratio: 61.54
• Revenue: 808.30M

Office REITs

Office REITs include office buildings leased to individuals and companies such as banks, law firms, government agencies and more. 

These are the REIT stocks to keep your eye on:

3. Boston Properties Inc.

Boston Properties is the biggest publicly held company of Class A office buildings in the best locations such as Los Angeles, Boston, New York, and Washington D.C. Its tenants are in various industries like media, advertising, technology, and life sciences.

As of early 2022, this REIT had $2.7B in active developments, many of which are in the life sciences sector. It also increased its dividend by 3.9% over the past three years.

Vital indicators:

• Dividend Yield: 4.34%
• P/E Ratio: 25.83
• Revenue: 753.64M

4. Postal Realty Trust

Postal Realty Trust owns about 1,400 properties leased to the United States Postal Service (USPS), including last-mile post offices and big industrial offices. 

USPS has the largest retail distribution network in the country and offers massive opportunities for Postal Realty Trust to grow through site acquisitions. During the pandemic, e-commerce grew, paving the way for postal facilities to emerge as the primary provider of last-mile delivery services.

Vital indicators:

• Dividend Yield: 6.41%
• P/E Ratio: 117.76
• Revenue: 11.93M

Industrial REITs

Industrial REITs typically own industrial properties that they rent out to tenants for as many as 25 years. Some REITs focus on specific industrial properties like distribution centers, warehouses, and e-commerce fulfillment centers. Industrial real estate is doing well, and demand continues to increase.

The best industrial REIT in 2022 is:

5. Plymouth Industrial REIT, Inc

Plymouth Industrial REIT, IncPlymouth Industrial REIT, Inc acquires and owns single and multi-tenant industrial sites like warehouses and distribution centers. These properties are in main logistics areas in secondary US markets like Kansas City, Chicago, and Cleveland.

Currently, Plymouth Industrial is one of the highest performing REITs. This is after a promising third quarter in 2021, where revenue had grown 30% year on year. The company even acquired 5.1 million square feet from 17 properties.  

Vital indicators:

• Dividend Yield: 4.83%
• P/E Ratio: N/A
• Revenue: 42.66M

Other REITs

REITs in other categories also show plenty of promise—these include experiential, medical, self-storage, and ETFs. 

These are the REIT stocks to keep your eye on:

6. Vanguard Real Estate ETF

Vanguard Real Estate ETF is a widely diversified REIT ETF that invests in hotels, office buildings, and other properties. 

REITs Exchange-Traded Funds (ETF) invest a significant portion of their shares in acquiring income producing real estate. As an investor, you can use a REIT ETF like Vanguard to get more exposure to different REITs that are a part of this asset class.

Vanguard has domestic REIT stocks and has obtained exceptional market returns in 2021. This is mainly due to inflation propelling asset values and market rent increases in different locations and asset classes. 

Vital indicators:

• Dividend Yield (2021 year end): 2.82%
• P/E Ratio: N/A
• Revenue: 42.66M

7. Public Storage

Public Storage is a self-storage REIT that owns storage facilities leased to companies and individuals. It’s the largest self-storage brand in the US and has over 2,500 facilities in the US, Canada, and Europe. 

This REIT has made it a point to maximize its growth opportunities. In early 2022, it purchased 10 self-storage facilities for $127.7M. 

Over the past few years, the company also invested in technology, giving it a competitive edge over its peers. 

It started the eRental process in 2020 to enhance a customer’s move-in experience. And in 2021, it launched the Public Storage App that easily lets customers access their properties with a few taps.

Vital indicators:

• Dividend Yield: 2.68%
• P/E Ratio: 29.01
• Revenue: 993.27M

8. VICI Properties

VICI Properties is an experiential REIT that owns an extensive portfolio of properties in gaming, entertainment, and hospitality locations. This includes MGM Grand, Venetian Resort Las Vegas, and Caesars Palace Las Vegas. 

The company has automated increases based on the consumer price index for 97% of its rental agreements. So rent increases when the consumer price index rises.

Vital indicators:

• Dividend Yield: 5%
• P/E Ratio: 17.82
• Revenue: 416.63M

9. Medical Properties Trust

Medical Properties Trust is a healthcare REIT that only focuses on acquiring hospitals, freestanding urgent care and behavioral health facilities. In early 2022, it was ranked the world's second largest non-government owner of hospitals. 

Over the last five years, this REITs performance has been exceptional, producing an average annual total return of 18%. Since 2019, Medical Properties Trust has acquired real estate worth $12.1B with an estimate of $5.4B of shareholder value.

Vital indicators:

• Dividend Yield: 8.08%
• P/E Ratio: 7.65
• Revenue: 417.14M

10. Essential Properties Realty Trust

Essential Properties Realty Trust (EPRT) buys, owns, and manages single-tenant properties. Its focus is long-term net leases to middle-market companies mainly in the service and experience industries like restaurants, automotive services, car washes, medical services and more.

EPRT closed out 2021 with $322M in investments for quarter 4 and $974M for the entire year. This REIT is one of the few that grew its Funds From Operations (FFO) from $51M to $151.7M between 2018 and 2021.

Vital indicators:

• Dividend Yield: 5.20%
• P/E Ratio: 23.70
• Revenue: 69.93M

Note: Another way of investing in REITs is through a mutual fund. A mutual fund accumulates a large pool of REITs under one banner. 

The most significant advantage of mutual funds is that if one type of REIT drops, other REITs can balance it. 

Now let’s explore why you should invest in REITs.

Advantages of Investing in REITs

Here are the benefits of investing in a real estate investment trust:

1. Real Estate Investment Trusts Sells Easily

REITs are relatively liquid assets so you can sell your REITs shares very quickly. 

2. Real Estate Investment Trusts Performs Well

Generally, REITs perform really well in an economic up-cycle and endure a recession. 

3. Real Estate Investment Trusts Pay High Dividends

REITs typically pay high dividends compared to the stock market. REITs yield about 2.85% annually, while the S&P 500 yields 1.3%. Equity REITs (excluding mortgage REITs) are valued at $1.5 trillion according to the FTSE Nareit US Real Estate Index.

Investing in real estate assets is a good way to inflation hedge and maintain purchasing power. But, there are other investment tools that can better combat inflation rate levels. 

Let’s explore two excellent options.

Other Investment Vehicles That Combat Inflation

Here are two other investment options to consider during inflation:

• Wine Investment: Investing in fine wine is a great alternate investment option. Fine wine appreciates each year and has outperformed many ETFs and global equities. Plus, it’s less volatile than gold or real estate. The fine wine market has generated 13.6% of annual returns during the past 15 years. 

Investing in wine is easier than ever with a wine investment company like Vinovest. Vinovest buys, stores, and sells fine wine from all over the world with just a few clicks. 

It has temperature-controlled bonded warehouses that make storing your rare wine bottles easy and safe. And, when you’re ready to sell, Vinovest will help you find the best buyer, so you make a profit. 

• Treasury Inflation Protected Securities (TIPS): Treasury Inflation Protected Securities are bonds issued by the government and are indexed to inflation. So when the inflation rate escalates, TIPS can achieve good returns.

Should You Invest in REITs?

Soaring inflation typically means rising interest rates. As we’ve seen, REITs can hold their own despite the rising rates, making them a suitable investment option. REITs will help diversify your portfolio as they offer any investor a good return in the current economy. 

But if you’re a wine enthusiast, consider an alternate investment option like fine wine. Vinovest is a hassle-free option to grow a successful portfolio with returns you can enjoy without leaving your home.