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Sticky Inflation a Boon for These Top 3 REITs

Even if price pressures have declined from their peak in 2022, they continue to hover above the pandemic mark. Federal Reserve Chair Jerome Powell recently acknowledged that prices of essential commodities remain elevated, indicating that more time is required to trim interest rates.

A healthy labor market and a persistent uptick in consumer outlays pushed consumer prices higher in March. Last month, the consumer price index (CPI) advanced 0.4% in sequence and registered an increase of 3.5% year over year, its biggest six-month jump, per the Labor Department. Market pundits had expected the CPI to increase 0.3% month over month and 3.4% from a year ago.

The core CPI that eliminates volatile energy and food costs increased by 0.4% for the month and 3.8% year over year. Nonetheless, an increase in energy and shelter costs resulted in an acceleration in consumer prices. The cost of auto insurance and food prices ticked up as well.

All at once, wholesale prices heated up. The Labor Department reported that the producer price index increased 2.1% in March, up from a gain of 1.6% in February. An increase in service cost accounted for most of the rise in wholesale prices.

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It’s worth highlighting that the Fed’s favored inflation gauge, the personal consumption expenditures (PCE) index increased 0.3% month over month in February and 2.5% on a 12-month basis, according to the Commerce Department. Powell expects the 12-month inflation rate measured by the PCE index to rise slightly more in March than in February.

Now, inflationary pressure may burn a hole in your pocket. However, for investment purposes, investing in a real estate investment trust (REIT) seems prudent. This is because REITs act as a hedge against price rises.

Lest we forget, with the rise in inflation, property prices scale upward. Landlords, too, charge higher rent amid elevated inflation, which increases rental income.

Thus, one should consider investing in Centerspace CSR, Ellington Residential Mortgage REIT EARN and Iron Mountain Incorporated IRM. They carry a Zacks Rank #1 (Strong Buy) and 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Centerspace is a real estate development company. Ceterspace currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 1.5% over the past 60 days. CSR’s expected earnings growth rate for the current quarter is 4.7%.

Ellington Residential Mortgage REIT specializes in acquiring and managing residential mortgage and real estate-related assets. Ellington Residential Mortgage REIT presently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 2% over the past 60 days. EARN’s expected earnings growth rate for the current year is 16.3%.

Iron Mountain operates as a real estate investment trust and serves customers of various industries through its facilities. Iron Mountain currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 4.5% over the past 60 days. IRM’s expected earnings growth rate for the current year is 7.3%.

Shares of Centerspace, Ellington Residential Mortgage REIT, and Iron Mountain have gained 6.6%, 6.9% and 6.8%, respectively, year to date.

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Zacks Investment Research


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