3 REITs Your Shopping Cart Must Have This Holiday Season

The U.S. has started celebrating its annual shopping spree which is expected to be the busiest buying season from the mountains to the prairies over the recent years. According to a forecast by the National Retail Federation (NRF), holiday sales (November and December) will see a solid 4.1% jump to $616.9 billion. The NRF prediction is higher than both last year’s growth of 3.1% and the 10-year average sales increase of 2.9%.

As per Shop.org online sales too are projected to increase 8–11% to around $105 billion for this holiday season. In fact, retail sales have already rebounded in October with a 0.3% rise against a 0.3% decline in the prior month, and these projections tag along big promises for the retailers.  

What set the mood? Of course an improving economy and consequent positive sentiments. There is a rise in the number of people getting hired (the unemployment rate fell to 5.8% in October – the lowest since Jul 2008 – from 5.9% in September) plus consumer confidence is building up (index moved up to 94.5 in October from 89.0 in September). Adding fuel to the fire is the falling oil price, which is leaving people with more disposable income.

The general optimism would translate into greater benefits for the real estate sector – the REITs. Higher retail sales – whether online, from physical stores or restaurants – always bring huge profits for these REITs. This is because increased sales at physical stores and restaurants would involve increased footfalls at malls and shopping centers, which should create further demand for space. Online sales too need real space for storage and efficient distribution. The Internet has also brought back the once less-favorite real estate – the logistic properties – in the limelight. Moreover, malls are no longer only a boring shopping hub. To lure more customers, Landlords are giving their malls a facelift, renovating them as swanky entertainment zones to meet customer’s demand for one-stop shopping, dining and entertaining, as well as distribution hubs. Malls and shopping centers also opt for overage rent agreements under which tenants need to pay additional rent when sales attain a pre-specified target. So a good shopping season essentially fattens landlords' wallets. Investors also look forward to the holiday buying season. There are stocks from seasonally thriving sectors that can turn out to be gainful investment options. We have handpicked 3 stocks to enhance your portfolio. Aside from having solid fundamentals, these REITs hold a favorable Zacks Rank.

The Macerich Company (MAC - Analyst Report)
This Zacks Rank #2 (Buy) retail REIT gained 9.6% on Nov 19 on the revelation of Simon Property Group Inc.’s (SPG -Analyst Report) accumulation of a 3.6% stake in Macerich. Simon Property also disclosed that it may further seek a waiver for excess share provision (that limits stake ownership of over 5%), which could pave way for further stake addition in Macerich. (Read: Macerich Jumps as Simon Property Reveals 3.6% Stake). Headquartered in Santa Monica, CA, Macerich boasts a solid portfolio of high-quality assets, particularly on the West Coast. In numbers, currently, the company owns 56 million square feet of real estate space, mainly comprising interests in 52 regional shopping centers, making it alluring in the retail REIT space.

Prologis Inc. (PLD - Analyst Report)
This industrial real estate company, with principal executive office in San Francisco, CA, also benefits from rising online sales. This is because higher Internet retailing and supply-chain consolidation is generating greater demand for logistics infrastructure and efficient distribution networks. But vacancy rates are tightening with construction starts persistently lagging demand growth, thereby significantly pushing up rents in many U.S. markets. With its solid capacity, Prologis is well leveraging from this demand-supply imbalance. This Zacks Rank #2 company posted an earnings surprise of 4.35% in the last reported quarter. Over the past 30 days, the Zacks Consensus Estimate for 2014 moved up a cent to $1.86 per share while that for 2015 also climbed a cent to $2.00.

Tanger Factory Outlets Inc. (SKT - Snapshot Report)
This retail REIT with its headquarter in Greensboro, NC, has a solid portfolio of 46 upscale outlet shopping centers in 26 states coast to coast and in Canada. Annually, over 185 million shoppers visit Tanger Factory Outlet Centers, according to the company. Over 470 brand name companies have more than 3,000 stores at this retail REIT’s properties. Moreover, in the most recently reported quarter, the company posted an earnings surprise of 4.00%. Over the past 30 days, the stock has also witnessed favorable estimate revisions from analysts and has a Zacks Rank #2.

Bottom Line
The dip in price for REIT stocks over issues surrounding interest rate trends has made these stocks all the more attractive now. Further, these stocks offer investors solid dividend yields – the biggest attraction in the REIT industry. So no way these stocks should disappoint you even they fail to catch the Holiday rally.

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