Andreja Stojanovic
Overall, most prominent Real estate investment trusts – REITs – have substantially underperformed in 2024. Indeed, since the very start of the year, these funds have been noted as lagging, particularly compared to certain sectors in the stock market.
Despite this, REITs remain a popular investment vehicle with great potential. Furthermore, their performance in the last 12 months can be seen as providing investors a ‘buy the dip’ opportunity, as many of the trusts have a generally strong growth track record.
For this reason, and with the New Year just around the corner, Finbold elected to dive into three strong picks for investors seeking to benefit from the real estate market without directly purchasing real estate.
Still, before we begin, it should be noted that 2025 brings the danger of resurgent inflation, with some institutions mulling over the possibility the Federal Reserve will again begin tightening financial conditions. For many REITs, 2023 was a weak year for precisely such reasons.
Crown Castle (NYSE: CCI)
Crown Castle (NYSE: CCI) is a REIT focused on owning and operating communications towers. Considering the pivotal role of such infrastructure in the digital age, it should be no surprise that the trust enjoyed a massive and prolonged bull run between late 2008 and late 2021.
Said rally enabled CCI to rocket approximately 1383.6% – an especially attractive figure once the 6.90% dividend yield is accounted for. Still, Crown Castle’s more recent fall from grace should not be entirely ruled out.
Indeed, the trust is 21.20% in the red in 2024 and has fallen 56.52% from its highs. If the bull market persists in 2025 and expands in earnest beyond the relatively narrow focus on large-cap and technology stocks, investors entering a position on the eve of New Year could see their assets massively appreciate.
Realty Income (NYSE: O)
Realty Income (NYSE: O) is another popular but risky bet for 2025. The trust boasts a massive portfolio, primarily of properties in several European countries and the U.S., with long-term, net lease agreements with single tenants.
O has been trading with substantial volatility throughout its existence, with 2024 being no exception. Furthermore, though the fund stood solidly in the green in October, it has plummeted since and is, at press time, approximately 7.20% in the red year-to-date (YTD).
Due to many of its clients being prominent firms such as Walgreens (NASDAQ: WBA) and Dollar General (NYSE: DG), a bet on Realty Income is, in many ways, a bet on the strength – or potential pitfalls – of the Trump economy, likely to offer some of its firsts fruits already in the initial months of the administration.
Finally, whatever its actual performance in the coming 12 months, Realty Income remains an attractive investment due to its 5.98% annual dividend yield.
Digital Realty Trust (NASDAQ: DLR)
Digital Realty Trust (NASDAQ: DLR) stands in stark contrast to the other REIT picks, as its niche has been one of the top performers of 2024. Indeed, DLR is a data center real estate trust, meaning it has benefited extensively from the server-hungry artificial intelligence (AI) boom that started in late 2024.
Such a setup ensured that the trust is an impressive 33.19% in the green at press time and has, by all accounts, fully recovered from the downturn that started in 2021.
Though the YTD rally is not as impressive as the return on an investment in an AI stock like Nvidia (NASDAQ: NVDA) would have been, DLR, unlike the semiconductor giant, offers a respectable 2.73% annual dividend yield.
Elsewhere, it is worth pointing out that if the other two REITs represent bets that the overall bull market will continue but that real estate trust trends will reverse, a Digital Realty investment represents the wager that the situation will remain largely the same.
Though there is some consensus that such a scenario will play out in 2025, there are no guarantees, and the big tech rally in recent years generated a plausible concern that a large bubble has formed.
Featured image via Shutterstock
