Rent prices increased 5.8% in June from a year ago, marking the fastest pace since 1986, driving the overall inflation higher. The rising mortgage rates have made would-be home buyers drop out and slide into the overcrowded rental market.
Moreover, prices are expected to remain elevated. “Even if rents are coming down later this year, the CPI measure will likely still have rent surging well into 2023,” said Anna Wong, the chief U.S economist for Bloomberg Economics.
The average monthly rent for a Manhattan apartment surpassed $5,000 for the first time in June, and brokers expect the prices to surge further.
The rising rent prices should bode well for residential REITs Daiwa House Industry Co., Ltd. (DWAHY) and Boardwalk Real Estate Investment Trust (BOWFF), which could be ideal additions to your portfolio now. However, we think Independence Realty Trust, Inc. (IRT) is best avoided now, given its rising debts.
Stocks to Buy:
Daiwa House Industry Co., Ltd. (DWAHY)
Headquartered in Osaka, Japan, DWAHY engages in the construction business worldwide. It operates through Single-Family Houses; Rental Housing; Condominiums; Existing Homes; Commercial Facilities; Logistics, Business, and Corporate Facilities; and Other Businesses segments.
DWAHY’s trailing-12-month revenue came in at $36.47 billion. Its trailing-12-month gross profit stood at $7.10 billion while operating income was $3.14 billion. Also, its trailing-12-month EPS came in at $2.82.
Analysts expect DWAHY’s revenue for the fiscal year ending March 2023 to come in at $33.43 billion, indicating an increase of 118.8% year-over-year.
DWAHY gained 4.3% over the past month to close the last trading session at $23.49.
DWAHY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
DWAHY also has a B grade in Growth, Stability, and Value. It is ranked #1 of 24 stocks in the REITs - Residential industry.
Beyond what is stated above, we’ve also rated DWAHY for Momentum, Sentiment, and Quality. Get all the DWAHY ratings here.
Boardwalk Real Estate Investment Trust (BOWFF)
BOWFF is an open-ended real estate investment trust. The trust is an owner and operator of multi-family rental communities.
For the fiscal quarter ended March 31, 2022, BOWFF’s rental revenue increased 2.2% year-over-year to $118.30 million. Its net operating income grew 1.6% from the year-ago value to $64.90 million. Funds from operations for the quarter stood at $34.50 million, reflecting a 3.8% increase year-over-year.
Street expects BOWFF’s revenue in the quarter ended June 2022 to come in at $94.08 million, indicating a marginal increase year-over-year. Its FFO per share is expected to improve 3.1% year-over-year to $0.62. BOWFF also beat the consensus FFO per share estimates in three of the trailing four quarters.
BOWFF’s shares have gained 4.6% over the past month to close the last trading session at $33.60.
BOWFF’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our POWR Ratings system.
The company has an A grade in Stability and a B in Value and Growth. The stock is ranked #3 in the same industry. Click here to get BOWFF’s Momentum, Quality, and Sentiment ratings.
Stock to Avoid:
Independence Realty Trust, Inc. (IRT)
IRT is a real estate investment trust that owns and operates multifamily apartment properties across non-gateway U.S. markets.
IRT’s total revenue increased 172.8% year-over-year to $150.36 million in the fiscal quarter ended March 31, 2022. However, total expenses increased by 220.3% from the prior-year quarter to $146.15 million. Total debt also increased 168.3% from the same period the prior year to $2.54 billion.
The stock has declined 17.9% year-to-date and 5.1% over the past six months to close its last trading session at $21.20.
IRT’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
IRT also has a Growth grade of F and a Stability, Value, and Quality grade of D. It is ranked the last in the same industry. Click here to see the additional POWR Ratings for IRT (Sentiment and Momentum).
DWAHY shares were trading at $23.48 per share on Thursday afternoon, down $0.01 (-0.04%). Year-to-date, DWAHY has declined -18.19%, versus a -15.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
2 Residential REITs to Buy and 1 to Sell Amid Skyrocketing Rent Prices StockNews.com
