Last month, the Federal Reserve raised its benchmark interest rate by 75 basis points, the highest increase in a single meeting since 1994, and could raise rates further to fight the multi-decade high inflation. As a result, many analysts expect the economy to slip into a recession.
In addition, a decline in consumer spending and other macroeconomic headwinds are expected to keep the stock market under pressure. Amid this environment, investors could turn toward large-cap REIT stocks to hedge their portfolios against the market fluctuations, as they offer a steady income stream through dividends.
It could be wise to invest in quality REITs Crown Castle International Corp. (CCI), Equinix, Inc. (EQIX), and Weyerhaeuser Co. (WY). These stocks are rated Buy in our proprietary rating system.
Crown Castle International Corp. (CCI)
With a market capitalization of $74.64 billion, CCI owns, operates, and leases more than 40,000 cell towers and approximately 80,000 route miles of fiber supporting small cells and fiber solutions across every major U.S. market. This nationwide portfolio of communications infrastructure connects cities and communities to essential data, technology, and wireless service - bringing information, ideas, and innovations.
On April 20, 2022, Jay Brown, CCI’s CEO, said, “We expect the deployment of 5G in the U.S. to extend our opportunity to create long-term value for our shareholders while delivering dividend per share growth of 7% to 8% per year."
While CCI’s four-year average dividend yield is 3.18%, its current dividend translates to a 3.41% yield.
CCI’s site rental revenues increased 15% year-over-year to $1.58 billion in the first quarter, which ended March 31, 2022. The company’s adjusted EBITDA grew 22% year-over-year to $1.10 billion, while its income from continuing operations came in at $421 million, representing a 248% year-over-year increase. Also, its income from continuing operations per share came in at $0.97, up 246% year-over-year.
Analysts expect CCI’s EPS and revenue to increase 56.1% and 9.4% year-over-year to $3.95 and $6.94 billion, respectively, in fiscal 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters.
It’s no surprise that CCI has an overall B rating, equating to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
In addition, the stock has a B grade for Growth, Stability, Momentum, and Sentiment. Click here to see CCI’s ratings for Quality and Value as well. In addition, CCI is ranked #9 out of 51 stocks in the REITs - Diversified industry.
Equinix, Inc. (EQIX)
EQIX is the world's digital infrastructure company, enabling digital leaders to harness a trusted platform to bring together and interconnect the foundational infrastructure that powers their success. It allows today's businesses to access the right places, partners, and possibilities they need to accelerate their advantage. It has a market capitalization of $61.26 billion.
On May 3, 2022, EQIX announced it had extended Platform Equinix deeper into Latin America following the acquisition of four data centers in Chile and one additional data center in Peru from Empresa Nacional De Telecomunicaciones S.A. This acquisition solidifies the company's position as the region's largest provider of digital infrastructure services.
While EQIX’s four-year average dividend yield is 1.70%, its current dividend translates to a 1.84% yield.
EQIX’s revenue increased 2% year-over-year to $1.70 billion in the first quarter, which ended March 31, 2022. The company’s operating income grew 7% year-over-year to $267 million, while its net income came in at $147 million, representing a 20% year-over-year increase. Also, its EPS came in at $1.62, up 19% year-over-year.
Analysts expect EQIX’s EPS and revenue to increase 29.5% and 10.5% year-over-year to $7.16 and $7.33 billion, respectively, in fiscal 2022.
EQIX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system. In addition, it has a B grade for Growth, Stability, Sentiment, Momentum, and Quality.
We have also graded EQIX’s for Value. Click here to access all of EQIX’s ratings. EQIX is ranked #1 out of 3 stocks in the REITs - Data Centers industry.
Weyerhaeuser Co. (WY)
WY is one of the world's largest private owners of timberlands which began operations in 1900. It owns or controls approximately 11 million acres of timberlands in the U.S. and manages additional timberlands under long-term licenses in Canada. The company manages these timberlands sustainably in compliance with internationally recognized forestry standards. It has a market capitalization of $25.30 billion.
On April 14, 2022, WY announced an agreement to purchase 80,800 acres of high-quality timberlands in North and South Carolina from a fund managed by Campbell Global for approximately $265 million. Devin Stockfish, president and CEO, said, "This transaction is a great example of our ongoing efforts to enhance our portfolio with high-quality, well-managed timberlands that generate solid returns for our shareholders."
While WY’s four-year average dividend yield is 4.7%, its current dividend translates to a 2.12% yield.
WY’s net sales increased 24.2% year-over-year to $3.11 billion in the first quarter, which ended March 31, 2022. The company’s adjusted EBITDA grew 36% year-over-year to $1.50 billion, while its net earnings came in at $771 million, representing a 13.2% year-over-year increase. Also, its EPS came in at $1.03, up 13.2% year-over-year.
Its revenue is expected to increase 1.8% year-over-year to $10.39 billion in fiscal 2022. It surpassed Street EPS estimates in three of the trailing four quarters. The stock has rallied 2.5% over the past year to close the last trading session at $33.98.
WY’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system.
The stock has a B grade for Quality, Value, and Momentum. Within the REITs - Diversified industry, WY is ranked #7. To see WY’s rating for Growth, Sentiment, and Stability as well, click here.
CCI shares were trading at $171.53 per share on Tuesday afternoon, down $0.83 (-0.48%). Year-to-date, CCI has declined -16.38%, versus a -18.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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