According to Morgan Stanley, REITs are poised to Outperform stocks next year

The US REIT sector could return 10% in 2022. What are REITs? Real estate investment trusts, of course, are companies that own property and can avoid corporate taxes bypassing the bulk of their winnings onto shareholders as dividends.


Raising interest rates are headwinds though the S&P and REITs have performed at par, REITs have outperformed by a margin of 34% v 26%. The 10% prediction isn’t by Barron’s but by Richard Hill, who runs REIT coverage for Morgan Stanley.

A third reason is that the house view at Morgan Stanley is that the S&P 500 will end in 2022 at 4400, otherwise known as 5% below recent levels. If that pans out, and Hill is proven right on REITs, the sector will have had another remarkable outperformance.

For value REITs, Hill likes mall giant Simon Property Group, which has bought stakes in struggling chains like J.C. Penney and Brooks Brothers. Those aren’t reflected in the valuation, he says, and the dividend was cut during the pandemic, but free cash flow is at pre-Covid levels, suggesting higher payments ahead. Recent yield: 4.4%.

For growth REITs, there’s AvalonBay Communities and Invitation Homes. Many people are buying homes across the US and this may be a chance to bank on it!

Here’s the source: REITs Are Poised to Outperform Stocks Next Year. Here Are 3 Picks. | Barron’s (