3 Top Real Estate Stocks to Buy in November

The holidays are right around the corner, and it’s a great time to buy stocks that you think will help you achieve your financial goals for years to come. I’m not talking about go-go growth stocks. Let’s look at something more prosaic: real estate stocks that pay you dividends while you let others manage the properties.

Real estate investment trusts (REITs) are just that kind of passive income machine. They have a long track record of solid total returns, while joining bonds as popular choices for conservative investments in long-term portfolios.

A diverse trio for reliable dividends

I own two dozen REITs, and three of my favorites are currently Agree Realty (ADC 0.51%), Getty Realty (GTY 0.61%)and Gladstone Commercial (WELL -0.74%). Agree focuses on retail properties, particularly big box stores, while Getty leases to auto-related businesses such as gas stations and parts stores. Gladstone owns a mix of industrial and office properties.

Each of these REITs has its own proven strategy that makes it an attractive investment. For example, Agree has kept its properties nearly 100% occupied during a difficult time for brick-and-mortar retail and is growing its portfolio – and revenue – at a record pace.

Getty, meanwhile, is in a particularly recession-proof and inflation-proof niche. People are going to keep buying gas, and the mix of sale-leaseback arrangements, new property development and redevelopments gives it the flexibility to take advantage of opportunities when it sees them.

And Gladstone is part of a group of REITs chaired by David Gladstone, which manages its holdings with a view to providing retirement income, steadily and on a monthly basis. Gladstone Commercial, for its part, focuses on industrial properties above the struggling office space business. The CEO recently said that all 15 of his prospective acquisitions were in that hot sector.

Gladstone has paid dividends monthly since shortly after its initial public offering in 2003, while Agree began paying monthly last year, and Getty continues to pay quarterly. The chart below shows how these three trusts performed against the benchmark Vanguard Real Estate ETF in total return over the past 10 years.

ADC Total Return Level Chart

ADC Total Return Level data by YCharts.

Dividends make up a large part of that total return. After all, REITs are obliged by tax legislation to pay out at least 90% of their taxable income to shareholders. The chart below shows the steady dividend yield that each of these REITs has provided to shareholders over the same 10-year period.

ADC Dividend Yield Chart

ADC Dividend Yield Data by YCharts.

Meanwhile, as you can see below, each company — especially Agree — has steadily grown its funds from operations (FFO, a key measure of a REIT’s earnings). Their payout ratios are at levels that should support more dividend growth and acquisitions for their portfolios. Currently, based on cash flow, they are at 82% for Agree, 80% for Gladstone and 70% for Getty.

ADC Funds from Operations (TTM) Chart

ADC Funds from Operations (TTM) data by YCharts.

In terms of growth, Agree added 121 net lease properties in the past quarter alone, giving it a portfolio of just over 1,700 locations in all 48 contiguous states. Getty invested in 10 properties in 3Q22 and has 1,021 in 38 states. Gladstone has 136 properties spread across 27 states, adding four industrial properties and selling three office properties in the third quarter.

Attractively priced for a November buy and hold

They can also currently sell at bargain prices. Of the three, Agree has the highest multiple of share price to FFO per share, a reasonable 17, while Getty is at about 11 times and Gladstone at about 10. This is after all three of them have participated in the overall market rally of late.

In the past month, for example, Agree shares have risen by around 9.5%, Getty by around 17.3% and Gladstone by almost 19%. But they’re still down for the year: Agree at around 6%, Getty at around 1% and Gladstone at a relatively whopping 28%.

Each has the balance sheet and a penchant for payouts that make me confident I’ll be thankful I gave them a place in my own investment portfolio for years to come.

Marc Rapport has positions in Agree Realty, Getty Realty, Gladstone Commercial and Vanguard Real Estate ETF. The Motley Fool has positions in and recommends Vanguard Real Estate ETF. The Motley Fool has a disclosure policy.

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