When investors consider purchasing real estate investment trusts (REITs), they want to find issues that have performed well recently, perhaps because of improving earnings. Stocks that show strong relative strength versus their peer group tend to continue to be among the best in the group for a while.
Take a look at the three top-performing REITs during April and the reasons each demonstrated such strong performances:
Ventas Inc. VTR is a Chicago-based diversified healthcare REIT with over 1,200 properties that include senior living communities, life science, research and innovation properties, medical office and outpatient facilities and other healthcare facilities. Ventas has been in business for over 20 years and is a member of the S&P 500.
Despite not having a great deal of news, Ventas was the leading REIT in April with a total gain of 11.88%.
There were, however, several analyst announcements. Both RBC Capital Markets and Credit Suisse maintained Outperform ratings on Ventas in April, but RBC Capital lowered its price target from $56 to $54, and Credit Suisse lowered its price target from $51 to $50. Barclays maintained an Overweight rating on Ventas while lowering its price target from $57 to $55. Wells Fargo initiated coverage on Ventas with an Overweight rating without assigning a price target.
Ventas pays a quarterly dividend of $0.45 per share, and the annual dividend of $1.80 per share yields 3.77%.
Ventas is scheduled to announce its first-quarter operating results on May 8. Perhaps the price rise is in anticipation of strong earnings.
Veris Residential Inc. VRE is a Jersey City, New Jersey-based residential REIT that primarily owns, operates, acquires and develops Class A multifamily properties. Veris has sold about 22 office properties over the last two years as it transitions from a diversified REIT to a residential REIT.
Veris Residential was the second-strongest performer in April, with a total return of 11.68%. There were basically two days that accounted for most of that return.
The first big gain came after Veris reported the closing of the $420 million sale of Harborside 1,2 and 3 Class A office buildings in Jersey City. The sale netted Veris about $360 million and was a large step in a two-year process of transitioning the company away from owning office properties toward owning multifamily residential properties. Wall Street currently has a negative view toward office REITs, so this sale was seen as a positive.
The second gain came on April 26 after Veris reported its first-quarter earnings. Funds from operations (FFO) of $0.15 was up 66.67% from $0.09 in the first quarter of 2022. Revenue of $66.92 million substantially missed the estimates of $87.66 million and was 32.47% below revenue of $99.1 million in the first quarter of 2022. Still, investors were pleased with the rise of the FFO and pushed shares higher.
Veris Residential suspended its $0.20 quarterly dividend in July 2020, but perhaps investors are hoping to see a reinstatement of the dividend soon.
EPR Properties EPR is a Kansas City, Missouri-based diversified experiential REIT that owns and operates 358 movie theater chains, amusement parks, resorts and other recreational venues across 44 states.
After a difficult two-month decline that saw EPR Properties fall from $42.50 to $33.50, it bounced back solidly in April to finish with a total gain of 10.85%. Helping that gain along was a solid earnings report on April 26 in which EPR Properties reported FFO of $1.26, beating the estimates by $0.07 and an increase from $1.10 in the first quarter of 2022. Revenue of $171.4 million beat the estimate of $148.89 million and was up 8.8% from the first quarter of 2022.
EPR Properties declined to provide 2023 forward guidance because of the uncertainties related to the bankruptcy proceedings of Regal Theaters.
On April 13, EPR Properties announced a monthly dividend of $0.275 per share, payable on May 15 to shareholders of record as of April 28. The annual dividend of $3.30 per share yields 8.09%.
Investor note: After a large price run-up, it’s often prudent to wait for a small pullback before entering a buy position on extended stocks.
Over the past five years, private market real estate investments have outperformed the publicly traded REIT market by about 50%. Check out Benzinga’s Real Estate Offering Screener to discover the latest passive real estate investments.
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