Many real estate investment trust (REIT) stocks that were trounced throughout much of 2022 have shown much-improved price performance over the past two months. But analysts have been slow to upgrade the sector, citing ongoing interest-rate hikes and fears of a recession in 2023.
That may be changing, especially if the Federal Reserve begins to taper down on its rate hikes as Chairman Jerome Powell indicated could happen. Take a look at three REITs that have seen analyst upgrades within the past few weeks:
Mid-America Apartment Communities Inc. MAA is a Germantown, Tennessee-based residential REIT whose specialty is purchasing and leasing apartment complexes. Mid-America Apartment Communities owns over 101,000 units in 296 communities across 16 states and Washington, D.C. Most of Mid-America Apartment Communities’ properties are located in the Southeast, Southwest and Mid-Atlantic states.
This past week, Goldman Sachs analyst Chandni Luthra upgraded Mid-America Apartment Communities from Neutral to Buy, while raising her previous price target from $178 to $194.
Mid-America Apartment Communities has an annual dividend of $5, which yields 3%. The 52-week range is $141.13 to $231.63, and the most recent closing price was $163.62. This represents a potential upside of 19.2% to the analyst’s new target price.
UDR Inc. UDR is another residential REIT that owns, leases and manages 58,464 apartment units across 13 states plus Washington, D.C. UDR, formerly known as United Dominion Realty Trust, is based in Highlands Ranch, Colorado, and has been in business for over 50 years. It was added to the S&P 500 in 2016.
At the beginning of December, analyst Adam Kramer of Morgan Stanley upgraded UDR from Equal-Weight to Overweight. At the same time he chose to lower his price target from $49 to $47.
UDR has an annual dividend of $1.52, which yields 3.7%. The 52-week price range is $37.18 to $61.06. Its most recent closing price was $40.30, and that represents 17% of potential upside from here.
Healthpeak Properties Inc. PEAK is a Denver-based healthcare REIT that owns and operates private-pay facilities such as life science centers, medical offices and senior housing. The company was added to the S&P 500 in 2008.
Healthpeak Properties owns 464 properties in Colorado, Tennessee and California valued at more than $20 billion. Its diversification of property types helps Healthpeak reduce the risks of a recession. Many of Healthpeak Properties’ life science tenants are large, well-known pharmaceuticals, such as Amgen Inc, Pfizer Inc and Bristol Myers Squibb Co.
Analyst Steve Sakwa of Evercore ISI Group recently upgraded Healthpeak Properties from In-Line to Outperform, simultaneously initiating a $28 price target.
Healthpeak Properties has an annual dividend of $1.20 yielding 4.7%. The 52-week price range for Healthpeak Properties is $21.41 to $36.85. From its most recent closing price of $25.30, that represents a potential upside of 10%.
Although analyst upgrades can propel stocks higher, investors should keep in mind that analysts are not always right. Many of them have at best a 50% overall success rate. Investors are urged to always do their own due diligence before purchasing any stock.
Weekly REIT Report: REITs are one of the most misunderstood investment options, making it difficult for investors to spot incredible opportunities until it’s too late. Benzinga’s in-house real estate research team has been working hard to identify the greatest opportunities in today’s market, which you can gain access to for free by signing up for Benzinga’s Weekly REIT Report.
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