The #1 Real Estate Stock to Buy Right Now
Investors seeking meaningful dividend income have long looked to real estate investment trusts (REITs) as a sector of focus. However, finding the right real estate stock to put in one’s long-term portfolio isn’t exactly a cut-and-dried task.
Indeed, not every REIT is created the same. Far from it. Investors must navigate a range of real estate types, locales, and management teams to find the right fit for one’s portfolio.
In this article, I’m going to highlight why I believe WPT Industrial REIT (TSX:WIR.U) is one of the best real estate stocks for long-term investors today. Let’s dive in.
The market outlook is positive for real estate stocks
Among the key drivers for real estate stocks is interest rates. Given the pandemic, and the associated economic worries that came alongside this public health crisis, central banks have kept interest rates near zero for some time. This interest rate environment is very bullish for REITs such as WPT.
As a key industrial real estate player in North America and abroad, WPT benefits from such an environment. The value of the trust’s underlying portfolio is worth more when interest rates are low. For those who expect this current interest rate environment to persist, this is a very good thing. In other words, WPT and its REIT peers are hedges against the economy continuing to sputter for a long time.
Additionally, WPT has positioned itself well among its peers. To gain better access to a growing capital and development pipeline, WPT has recently shifted its focus to private sector partnerships. As of now, this REIT includes Alberta Investment Management Corporation, Canada Pension Plan Investment Board, and Investment Management Corporation of Ontario as its strategic partners. This represents the institutional confidence that the REIT has in its management team.
These partnerships provide investors with a rather strong base from which to work with. Unlike many smaller REITs in Canada, WPT has the backing of some big names. Besides being a major vote of confidence, this signals to the market WPT is likely to outperform over the long term.
Solid fundamentals with high growth potential
Industrial real estate is one asset class I believe is undervalued, relative to other related real estate segments. Rising e-commerce activity is likely to place heavy demand on distribution and warehousing facilities. It just so happens WPT is an industrial real estate stock with a portfolio of some of the highest-quality assets in this domain.
This factor alone has driven some impressive fundamentals with WPT. Experts at Vision Capital believe that the units are surprisingly undervalued. These analysts suggest this real estate stock is trading at a 17% discount to its net asset value. That’s a significant gap.
Additionally, a 3.5% dividend yield is really just the cherry on top when considering these existing fundamentals.
Accordingly, value investors looking for a REIT with capital appreciation potential ought to consider WPT. This is a company that continues to trade at a cheaper valuation to its peer group, which trades (on average) around 18% higher than WPT currently.
WPT is an incredible long-term investment opportunity for long-term investors. This real estate stock is among the best of its peer group, with impressive long-term upside. Accordingly, this is a stock I’m considering for my portfolio today.
The post The #1 Real Estate Stock to Buy Right Now appeared first on The Motley Fool Canada.
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Fool contributor Chris MacDonald has no position in any stocks mentioned in this article.