Savvy income investors understand that REIT performance can be highly cyclical and the best-performing REITs of one year can quickly turn into dogs. Nowhere is that more apparent than looking at the top REITs of the last few years.
As measured by the S&P U.S. REIT index, domestic REITs have returned over 21% YTD and almost 36% over the last one-year period. However, as you can see in the chart below, courtesy of S&P, most of those returns have resulted entirely from the pandemic recovery.
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In fact, that index has gained a paltry 1.8% over the most recent five-year period. So, in the interest of identifying the best-performing REITs that aren’t being skewed entirely by the pandemic recovery, we’ve identified five of the best-performing REITs in 2021 that also boast high five-year returns.
5 of the Best-Performing REITs of 2021 by Five-Year Returns
5. CubeSmart (CUBE)
CubeSmart is a REIT that owns or manages over 1,200 self-storage facilities across the U.S. and is one of the top three owners and operators of self-storage properties in the United States. CUBE has undoubtedly benefited from the current real estate market as more homebuyers rent units after selling and while they wait for homes to be built or for a transaction on an existing home to close. CUBE sold off with everything else at the beginning of the pandemic but was back to pre-pandemic levels by October of that year. Since then, CUBE has gained over 49% YTD and 56% over the last five years. CUBE also offers a 2.82% distribution yield.
4. STAG Industrial (STAG)
STAG is one of the best-performing REITs focused on the acquisition and operation of single-tenant, industrial properties throughout the U.S. STAG currently has more than 490 properties totaling over 99 million square feet. Both the company’s acquisition and leasing programs have shown strong growth over the last 10 years and the share price reflects that. STAG is up 31.49% YTD and 59% over the last five years and also pays a 3.63% distribution yield.
3. Equity Lifestyle Properties (ELS)
Equity Lifestyle Properties is an owner and operator of manufactured home communities, RV resorts and campgrounds in North America. The company currently operates 434 properties containing over 165,000 individual sites. While it’s almost certainly benefitting from the reopening travel boom, Equity Lifestyle Properties has been growing for years. ELS is up 36% YTD and over 103% in the last five years. That growth comes at a price though: the company’s efforts to continue investing translates to the lowest distribution yield on our list, coming in at only 1.76%.
2. American Tower (AMT)
American Tower owns and operates wireless and broadcast communications infrastructure in several countries worldwide. This Fortune 500 company has approximately 214,000 communications sites and is actively engaged in all stages of the wireless network development process. As one of the best-performing REITs that doesn’t rely on human traffic, AMT corrected briefly with the arrival of the pandemic but was back to pre-pandemic levels by April 2020. AMT is up 28% YTD and 138% over the last five years. The shares also offer a 1.8% distribution yield.
1. Innovative Industrial Properties (IIPR)
Innovative Industrial Properties is a name that may be familiar to you, and which also happens to be one of the most popular institutional investments targeting the growing legal marijuana trade. Due to ongoing federal schedule 1 designation, institutional investors are generally unable to invest in marijuana growers or sellers directly. Enter IIPR. The company owns a nationwide portfolio of properties which it leases to state-licensed medical-use growers. Because the leasing program doesn’t touch marijuana itself, big institutional buyers are free to scoop up shares. And they have been. IIPR is up just over 17% YTD but is up an astonishing 1,027% over the last five years. The stock also offers a healthy 2.6% distribution yield. One risk differentiating this from the other best-performing REITs is the legal status of marijuana. Federal legalization would likely hurt the performance of IIPR as institutions would be able to make direct investments in growers and dispensary operators, and agricultural competition for growing land would likely spike.
Do you own any of the best-performing REITs on this list in your portfolio?