2 A-Rated REITs To Sleep Well At Night

Core Insights - The article emphasizes the importance of balance sheet health for REITs in a high-interest-rate environment, highlighting that elevated rates impact balance sheets significantly [32] - It provides a snapshot of eight A-rated REITs, indicating their strong financial strength and above-average valuation scores [34] Group 1: A-Rated REITs Overview - Realty Income (O) is rated A3 (Moody's) and A- (S&P), with a significant portion of its investment volume in Europe, achieving an 8.2% initial weighted average cash yield [35][36] - Realty Income has increased its 2024 earnings guidance to FFO per share of $4.15 to $4.21 and raised its investment guidance from $2 billion to $3 billion [36] - The company trades at 13.1x P/AFFO, comparable to valuations during the Great Recession and COVID-19, indicating a favorable valuation [36][37] Group 2: Mid-America (MAA) Overview - Mid-America (MAA) is rated A3 (Moody's), A- (S&P), and A- (Fitch), with a strong balance sheet supported by $1.1 billion in liquidity and low leverage [44][45] - The company has reaffirmed its core FFO guidance for 2024, with a range of $8.70 to $9.06 per share, and has a solid history of predictable earnings and dividends [47] - Mid-America trades at 16.9x P/AFFO, indicating a strong valuation compared to historical averages [49] Group 3: Performance and Growth Projections - Realty Income is expected to see AFFO growth of 4% in 2024 and 2025, forecasting a total annual return of 25% based on dividend yield and price appreciation [43] - Mid-America anticipates a negative growth of -4% in 2024, but expects improvements in 2025 (+2%) and 2026 (+6%) as supply issues resolve [51] - The company has a 30-year performance record focused on high-growth sunbelt markets, maintaining strong occupancy rates [51]