In May, the S&P 500 fell almost 6% after climbing 17% from January to April.
The solution to this kind of volatility is regular, reliable dividends. To help you find those, we’re going to show you one of the best REITs to buy now.
This top REIT yields 9%.
Why You Should Buy REITs Before the Recession
Markets tend to fall when investors get nervous. And right now, investors have some things to worry about.
First, we have global trade tensions. Tariffs are threatening to erode gross domestic product in China and the United States, which could send ripples throughout the world economy as long as they are in place.
This has coincided with an inverted yield curve after an unusually long bull market, which investors fear could lose steam at any moment. The best way to deal with the uncertainty from these events is to have a clear strategy that reduces your risk.
Change is a constant. Just look at interest rates. The Federal Reserve can raise and lower them, all within six months or less.
We’re not saying a recession is certain, but the 10-year expansion after the 2008 to 2009 Great Recession has been the longest bull market on record.
But even if indices like the S&P 500 fall, that doesn’t mean all stocks are hit.
And REIT stocks are good candidates to survive a bear market. They have the cash flow stability to help shield them from uncertainty. Plus, their dividends can be safe havens for investors in volatile markets. That’s how the best REITs on the market attract investors, and this tends to keep the stock prices up and provide a cushion for any stock pullbacks
One way to find a stable REIT with great dividends is to use the Money Morning Stock VQScore™. It’s our proprietary system that finds the stocks with the most imminent breakout potential.
It just gave us the best REIT to buy in June – and here it is, with a perfect VQScore of 4.75…
No. 1 of the Best REITs to Buy Now
Whitestone REIT (NYSE: WSR) is the best REIT on the market today.
WSR shares fell 20% over several days in February on concerns that they might reduce their dividend.
But as the 9% dividend yield still stands, the only thing it did was put this stock at a great 20% discount.
WSR owns brick-and-mortar shopping centers, so the concerns were not ill-founded. Many shopping centers are shrinking or closing as Americans have started to buy online.
But the shuttering of retail is overblown from the perspective of a REIT like WSR.
The fact that some stores are closing doesn’t mean the space will be empty forever. REITs can adapt, and as they do, cash flow will remain stable.
WSR may have been taking a necessary precaution in a harsh retail climate by announcing they might lower the dividend, but it proved not to be the case.
Analysts are still forecasting flat earnings at WSR next year, $0.23 earnings per share (EPS) expected this year and $0.25 the next. That’s not a drop, and it may be why the stock has rebounded somewhat. Investors who buy in now can lock in the 9% yield, plus the upside potential of share price gains.
Investors also need to factor in economic strength. Yes, some areas of the U.S. economy are slowing, but many are in excellent shape. The job market is in its best shape in 50 years, and consumer confidence is near record highs historically. These strengths should help in avoiding retail shutdowns.
Wage increases, given the slowing labor market, might be on the way too. If they come, retailers may see a revival of spending and greater profits.
If that happens, fewer stores might close, which would be good news for Whitestone.
Interest rates are also a factor in the Whitestone story. Currently, estimates are that there is a 50% chance of interest rates falling in July.
From a macroeconomic view, purchasing shares of WSR will be supported by the likelihood of dropping interest rates. Interest rate cuts help drive economic growth in the United States, which will help retailers – and Whitestone, by extension.
That cut will help spur economic growth domestically, further assisting retailers, then their landlords, then their REITs.
With its impressive 9% dividend yield, Whitestone is our choice for one of the best REITs to buy now.
Source: Money Morning