He still got it!  Warren Buffett has made a quick 20% gain on his Capital STORE shares – here are 2 attractive REITs that could go under again.

He still got it! Warren Buffett has made a quick 20% gain on his Capital STORE shares – here are 2 attractive REITs that could go under again.

He still got it!  Warren Buffett has made a quick 20% gain on his Capital STORE shares - here are 2 attractive REITs that could go under again.

He still got it! Warren Buffett has made a quick 20% gain on his Capital STORE shares – here are 2 attractive REITs that could go under again.

Due to the nature of their business, real estate investment trusts have a strong appeal for income investors. A REIT owns income-producing real estate, collects rent from tenants and passes a portion of that rent on to shareholders in the form of regular dividends.

But REITs can also deliver great capital gains.

Check out STORE Capital, which has a large portfolio of investments with over 3,000 properties diversified across 49 states.

On Thursday, the company announced it has agreed to be acquired by Singapore sovereign wealth fund GIC and Oak Street in an all-cash transaction worth about $14 billion.

STORE Capital shares rose 20% on the news.

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Under the agreement, STORE Capital shareholders will receive $32.25 per share in cash, which is 20.4% higher than the stock’s closing price on the previous trading day. The agreement also includes a 30-day “go-to-shop” period, during which STORE Capital can solicit competing offers.

The transaction is expected to close in Q1 of 2023 if approved by STORE Capital shareholders.

This REIT doesn’t often make headlines, but it does have a famous investor: Warren Buffett. As of June 30, Buffett’s Berkshire Hathaway held 6,928,413 shares of STORE Capital.

Note that this is not the first time deep-pocketed investors have tackled a publicly traded real estate company. In June, Blackstone completed its $5.8 billion acquisition of rental apartment owners Preferred Apartment Communities.

If large asset managers are making significant moves into the space, retail investors may want to take note.

Here’s a look at two REITs that are particularly attractive to Wall Street right now.

Realty Income (O)

Realty Income is a REIT with a portfolio of over 11,000 properties under long-term lease agreements.

Among its best tenants are big names like Walmart, CVS Pharmacy, and Walgreens—companies that have survived and thrived through thick and thin.

In fact, the REIT claims to collect around 43% of its total rent from investment grade tenants. A diversified, quality tenant base allows Realty Income to pay reliable dividends.

Additionally, while most companies that pay dividends follow a quarterly distribution schedule, Realty Income pays its shareholders every month.

The stock currently yields 4.7%.

Jefferies analyst Jonathan Petersen has a ‘buy’ rating on Income Realty and a price target of $78 – about 23% above where the stock is today.

WP Carey (WPC)

WP Carey is another generous dividend payer from the REIT space. The company recently raised its quarterly dividend rate to $1.061 per share, representing an annualized yield of 5.1%.

To put things into perspective, the average S&P 500 company is currently yielding just 1.6%.

Those dividends are backed by a portfolio of 1,357 properties totaling approximately 161 million square feet. The company has invested in industrial, warehouse, office, retail and self-storage properties subject to long-term lease agreements with built-in rental escalators.

While the broad market is deep in the red year to date, WP Carey shares are actually up about 3% in 2022.

Raymond James analyst RJ Milligan expects the trend to continue. The analyst has an ‘outperform’ rating on WP Carey and a price target of $95 – suggesting a 14% upside from current levels.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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