5 Retail REITs With The Best Relative Strength

With approximately 200 real estate investment trusts (REITs) on the market today, it's difficult for investors to choose which REITs to buy. Parameters such as longevity, dividend growth, dividend yield, payout ratios and price to funds from operations (P/FFO) are typically employed in making purchase decisions.

It's also important to look at relative strength, or how a stock's performance compares to its peers over a measure of time. Stocks that show strong relative strength signify institutional buying and are frequently performed over a long period. The strongest stocks of a sector are also likely to still be performing well over the months ahead.

The retail REIT subsector has anywhere from 21 to 30 stocks, depending on which source is used. In recent years, many retail REITs have diversified into other types of properties, but the main core of their business is still in retail establishments.

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Take a look at the five retail sector stocks that have outperformed their peers over the past month, have a strong dividend yield and a history of dividend growth.

Alexander's Inc. ALX is a Paramus, New Jersey-based REIT that is externally managed by Vornado Realty Trust VNO, which also owns 33.1% of Alexander's stock. Alexanders has five large mixed-use retail properties in the New York City metropolitan area. For example, 731 Lexington Avenue is office and retail, and the Rego Center Complex includes retail properties and The Alexander apartment tower.

Alexander's pays a quarterly dividend of $4.50, which yields 8.24% on an annual basis.

From Dec. 8 to Jan. 8, Alexander's has had a total return of 15.56%, making it the top-performing retail REIT.

Macerich Co. MAC is a Santa Monica, California-based retail REIT that specializes in the acquisition, leasing and management of 48 million square feet in 44 regional town center malls all across the U.S.

On Dec. 20, Piper Sandler analyst Alexander Goldfarb maintained a Neutral position on Macerich but raised the price target 41.66% from $12 to $17. 

Macerich pays a quarterly dividend of $0.17 per share, which on an annual basis yields 4.55%. It was forced to cut its dividend from $0.75 to $0.10 in April 2020 when COVID-19 was rampant, but since then has increased the dividend by 70%.

Over the past month, the total return for Macerich was 11.65%. It's been a poor performer overall since November 2021, but the recent returns suggest that the turnaround will have some legs well into 2024.

Realty Income Corp. O is a San Diego-based, triple-net-lease REIT with over 13,250 properties around the world. The Monthly Dividend Company, as it's widely known, is a member of the S&P 500 and an S&P 500 Dividend Aristocrat. The occupancy rate for its portfolio is 98.8%.

On Dec. 12, Realty Income announced an increase in its monthly cash dividend from $0.256 to $0.2565 per share. The new annualized dividend amount of $3.078 presently yields 5.31%. This was the 123rd dividend increase since 1994 and the 105th consecutive quarter of dividend increases.

Over the past five years, the dividend growth is 22.1%, but the consistent monthly dividends help investors keep up with inflation.

Realty Income became much more diversified in 2023, purchasing a 21.9% interest in The Bellagio Las Vegas. It also added to its single-tenant retail properties by announcing it will acquire Spirit Realty Capital Inc. SRC, with an expected closing in the first quarter of this year.

Over the past month, Realty Income has had a total return of 8.02%.

Agree Realty Corp. ADC is a Bloomfield Hills, Michigan-based triple-net-lease REIT that focuses on retail properties. Its portfolio includes 2,135 owned and operated properties totaling 44 million square feet across 49 states. The majority of its tenants — 69% — are investment grade, including well-known names like Walmart Inc. WMT, Best Buy Co. Inc. BBY Dollar General Corp. DG and Kroger Co. KR.

Agree Realty was founded as Agree Development Co. in 1971 and went public as a REIT on the New York Stock Exchange in 1994 as Agree Realty Corp.

In its latest quarterly earnings report on Oct. 24, the third-quarter FFO of $1 beat the estimates of $0.99 and was above FFO of $0.96 in the third quarter of 2022. Revenue of $136.81 million beat the estimates of $134.97 million and was 24.3% above revenue of $110.07 million in the third quarter of 2022.

Analysts are recently somewhat mixed on Agree Realty. On Dec. 11, Mizuho analyst Haendel St. Juste downgraded Agree Realty from Buy to Neutral and lowered the price target from $67 to $61. But on Jan. 4, RBC Capital Markets analyst Brad Heffern maintained an Outperform rating on Agree Realty and raised the price target from $66 to $67.

Like Realty Income, Agree Realty pays a monthly dividend, making it a boon for income investors to pay regular monthly bills. In January 2021, it began paying monthly dividends of $0.21 per share. Since then, the dividend has grown by 17.06%, to $0.247 per share. The annual dividend yield is presently 4.69%.

Agree insiders were active purchasers of company stock in the fourth quarter of 2023. Agree Realty's total return over the past month is 7.64%.

NetSTREIT Corp. NTST is a Dallas-based triple-net-lease retail REIT with 547 properties across 45 states. Its single-tenant net leases cover 26 diverse industries. About 68% of its 85 tenants are investment grade, including Walgreens Boots Alliance Inc. WBA, Lowes Companies Inc. LOW, Dollar General Corp. DG and Walmart Inc. WMT.  

In NetSTREIT's third-quarter operating results, FFO of $0.31 per share beat the analyst estimate of $0.29 and its FFO of $0.30 per share in the third quarter of 2022. Revenue of $33.96 million beat the estimate of $32.2 million and was 35.8% higher than revenue of $25.01 million in the third quarter of 2022. Fourth-quarter earnings will be announced on Feb. 21.

On Jan. 2, Wolfe Research analyst Andrew Rosivach upgraded NetSTREIT from Peer Perform to Outperform and announced a price target of $22. Its most recent closing price was $17.83.

On Jan. 8, NetSTREIT provided guidance on 2024 adjusted FFO of $1.24-$1.28 per share.

NetSTREIT has increased its quarterly dividend from $0.10 per share in September 2020 to the most recent payout of $0.205 per share, yielding 4.6% on an annual basis.

NetSTREIT's total return over the past month is 7.28%.

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