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Among real estate investments, real estate investment trusts (REITs) have both growth potential and income from reliable dividends. Because they trade like stocks, it is easy to add REITs to your portfolio. The top 10 REITs by market capitalization represent a cross-section of the industry, with holdings across the real estate market. Each offers a window into the potential of real estate investing, blending traditional assets with modern approaches to property management. (All figures are as of the fourth quarter, 2023).
Key Takeaways
- Real estate investment trusts (REITs) enable investors indirect access to property assets.
- The top 10 REITs by market cap cover logistics, communications, digital infrastructure, and gaming, offering a range of choices to diversify a portfolio.
- While some REITs in this list have significant growth potential, it's important to perform due diligence and keep updated and informed to assess the various risk factors of each trust.
Top 10 REITs by Market Capitalization
| Top 10 REITs by Market Cap | |||||
|---|---|---|---|---|---|
| Name | Ticker | Market Cap | Sector | Dividend Yield | P/E Ratio |
| Prologis | PLD | $102.56B | Logistics real estate | 3.16% | 35.4 |
| American Tower | AMT | $93.06B | Communications real estate | 3.28% | 133.1 |
| Equinix | EQIX | $73.63B | Digital infrastructure | 2.20% | 84.3 |
| Simon Property Group | SPG | $46.05B | Shopping centers & restaurants | 6.25% | 18.2 |
| Public Storage | PSA | $45.50B | Self-storage facilities | 4.66% | 23.7 |
| Crown Castle | CCI | $45.29B | Communications infrastructure | 6.02% | 29.3 |
| Digital Realty | DLR | $42.01B | Data centers | 3.63% | 47.0 |
| Realty Income | O | $38.52B | Commercial real estate | 5.81% | 40.3 |
| VICI Properties | VICI | $29.58B | Gaming and hospitality | 5.81% | 11.9 |
| Goodman Group | GMG.AX | $28.79B | Industrial real estate | 1.30% | 28.5 |
REITs are required by law to distribute at least 90% of their taxable income to shareholders annually in the form of dividends. By distributing a great part of their taxable income, REITs can avoid paying corporate income tax at the entity level, although shareholders typically pay income tax on the dividends received.
Prologis (PLD)
Prologis operates extensively in the logistics real estate sector, focusing on areas with high growth potential. The company's portfolio spans about 1.2 billion square feet in 19 countries. Their client base is varied, comprising business-to-business, retail, and online fulfillment operations, among others.
American Tower (AMT)
American Tower, established in 1995, is prominent in communications real estate, focusing on cellphone and radio towers. The company owns, operates, and develops properties designed for multiple tenants and its portfolio includes about 219,000 communication sites globally. Over 43,000 of those are in the U.S. and Canada.
Equinix (EQIX)
Equinix is a multinational company focusing on internet connectivity and data centers. Founded in 1998, it operates as a real estate investment trust (REIT) and is known for providing data center space and interconnection services. Equinix's business model is based on providing secure, high-performance data centers where companies connect together their IT infrastructure and exchange data traffic.
Simon Property Group (SPG)
Founded in 1993 and headquartered in Indianapolis, Indiana, Simon Property Group concentrates on retail properties, including malls, outlets, and the Mills shopping centers. They have properties across North America and Europe, with its properties generating billions in annual sales.
Public Storage (PSA)
A member of the S&P 500 and FT Global 500, Public Storage acquires, develops, owns, and operates self-storage facilities. They have an interest in almost 2,900 self-storage facilities in 40 states and a 35% equity interest in Shurgard Self Storage Limited, which operates in seven Western European countries.
Crown Castle (CCI)
Established in 1994 and headquartered in Houston, Texas, Crown Castle is one of the largest providers of shared wireless infrastructure in the U.S. The company's extensive network of over 40,000 cell towers, about 80,000 route miles of fiber, and a growing portfolio of small cells, which are essential for 5G networks, makes it a prominent player in telecommunications.
Digital Realty (DLR)
Digital Realty Trust provides data center, colocation, and interconnection products. The company's customers include domestic and international firms in cloud and information technology, communications and social networking, financial services, manufacturing, energy, healthcare, and consumer products.
Realty Income (O)
Realty Income is an S&P 500 company that has had 631 consecutive monthly dividend payouts while increasing its dividend 118 times since its public listing in 1994. The firm focuses on long-term net lease agreements with commercial clients and owns over 11,700 properties.
VICI Properties (VICI)
VICI Properties owns one of the largest portfolios of gaming, hospitality, and entertainment properties, including Caesars Palace. Their portfolio includes 20 gaming facilities, over 14,500 hotel rooms, and more than 150 restaurants, bars, and nightclubs. The company also owns four championship golf courses and 34 acres of undeveloped land next to the Las Vegas Strip.
Goodman Group (GMG.AX)
Goodman Group is an Australian commercial and industrial property group. It owns, develops, and manages warehouses, large-scale logistics facilities, and business and office parks in 16 countries. The group concentrates on industrial properties in strategic locations around major gateway cities globally.
Types of REITs
REITs generally fall into three categories. Each of the top 10 REITs is an equity REIT:
- Equity REITs: These trusts invest in real estate and derive income from rent, dividends, and capital gains from property sales. The triple sourcing of income makes equity REITs the most common and popular.
- Mortgage REITs: These trusts invest in mortgages and mortgage-backed securities. Since these REITs earn interest from their investments, they are sensitive to interest rate changes.
- Hybrid REITs: These REITs invest in both real estate and mortgages.
What Is a Real Estate Investment Trust?
A REIT is a publicly traded company that owns, operates, or finances income-producing real estate. Modeled somewhat after mutual funds, REITs provide individual investors with exposure to income from real estate without actually having to buy, manage, or finance any properties themselves. REITs typically focus on specific sectors like residential, commercial, healthcare, or infrastructure and are known for offering high dividends. By law, REITs must pay out at least 90% of their operating income to shareholders.
What Was the First REIT?
The first REIT was the American Real Estate Investment Trust, also known as American Realty Trust, established in the U.S. in 1960. The trust followed the passage of the Real Estate Investment Trust Act of 1960, part of the Cigar Excise Tax Extension of 1960, which was signed into law by President Dwight D. Eisenhower. The legislation was designed to give small investors a way to invest in large-scale, income-producing real estate by buying equity. The introduction of REITs was significant for the real estate and investment industries, offering a new way for individual investors to access income-generating real estate assets.
What Are the Risks and Benefits of Owning REITs?
Benefits of investing in REITs include a regular income stream through dividends, diversification in an investment portfolio, and liquidity as they are traded on major stock exchanges. However, REIT investments also have risks, such as market volatility, interest rate sensitivity (especially for mortgage REITs), and potential management and operational inefficiencies. Additionally, REITs may not offer the same level of capital appreciation as other equities.
What Are REIT ETFs?
Real estate exchange-traded funds (ETFs) hold baskets of securities in the real estate sector, providing investors with a less costly way to speculate in the industry than other options. In essence, REIT ETFs hold a portfolio of various REITs that enable investors to diversify across the real estate space.
The Bottom Line
Real estate investment trusts (REITs) are a convenient way to add real estate as an asset class to your portfolio. The top 10 REITs, as measured by their market capitalization, highlight the diverse holdings of these trusts. From data centers to shopping complexes, these REITs have thus far adapted to changing markets, leveraging their assets to deliver consistent dividends.
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