3 real estate stocks that could make you a millionaire

Real estate has been one of the worst-performing parts of the stock market since the Federal Reserve began raising interest rates in 2022, but that has created some opportunities to add high-quality businesses to your portfolio at historic valuations cheap. Here are three in particular that are designed to deliver excellent long-term returns that deserve a closer look right now.

The right kind of retail

Real estate income (A 1.16%) it’s the first real estate investment trust or REIT I’ve ever bought and I’ve been building my position for over a decade. If you’re not familiar, Realty Income owns a portfolio of over 15,000 single-tenant properties in the US and Europe, mostly occupied by retail tenants.

Stocks are designed for excellent long-term returns, regardless of what the economy is doing. Its tenants mostly operate in recession-proof or e-commerce businesses. Think properties like supermarkets, pharmacies and warehouse clubs. In addition, tenants sign long-term leases that require them to cover taxes, insurance and maintenance costs. All Property Income needs to do is purchase a property with a high quality tenant and then enjoy predictable and growing income year after year.

At recent prices, Realty Income pays a dividend yield of 5.2% in monthly installments and has a fantastic history of dividend increases and total market returns over its 30-year history as a publicly traded company.

A value game with tons of potential

EPR properties (EPR 1.33%) is another REIT, but this one is laser-focused on experiential real estate. It owns water parks, ski resorts, food and play businesses (TopGolf is one of its biggest tenants), and more. But the biggest type of property is also the biggest risk factor, namely cinemas.

It’s no secret that it’s been a tough few years for the movie theater business, and this has led to the bankruptcy of one of EPR’s biggest tenants, Regal Entertainment. However, this has been resolved favorably for EPR, and while there is still quite a bit of uncertainty in the cinema industry, it is important to realize that EPR cinemas tend to be of high quality and generally perform well.

EPR sees a massive $100 billion growth opportunity in its target property types over the coming years and, in the meantime, offers a 7.2% dividend yield for investors willing to hold on as the movie theater situation evolves.

Tremendous assets and growth potential

Last but not least, Ryman Hospitality Properties (RHP 0.65%) has been one of the best performing housing stocks since the Fed started raising rates, and for good reason. Its properties have bounced back from the pandemic and are performing better than ever.

Ryman owns six large-scale hotels that focus on group events, most under the Gaylord brand name. It also owns a portfolio of entertainment assets, including iconic performance venues such as the Grand Ole Opry and Ryman Auditorium, as well as the Ole Red restaurant and entertainment chain. In its most recent quarter, Ryman’s revenue hit an all-time high, as did average daily room rates. In fact, Ryman’s business is doing so well that the company is investing hundreds of millions of dollars to improve the cash-generating potential of its hotels and has a massive entertainment venue under construction in Nashville.

At the time of writing, Ryman pays a dividend yield of 4.3% and continues to trade at a very attractive long-term valuation of around 12 times forward funds from operations (FFO, or the real estate equivalent of earnings ).

Can these really make you a millionaire?

To be perfectly clear, I don’t think any of these actions will make you a millionaire quickly. But I can definitely help you get there in time. Consider the following:

• $10,000 invested in Realty Income’s 1994 listing on the New York Stock Exchange would be worth about $546,000 today, assuming all dividends are reinvested.
• EPR Properties went public in 1997 and has since produced a total return of 1,530%, outperforming the S&P 500, even after the recent theater-fueled downturn.
• Ryman has produced 715% total returns since converting to a REIT in 2012.

So while none of these stocks doubled or tripled investors’ money in a short period of time, they all delivered massive long-term gains. If you invest in solid REITs like these, hold the shares for a long time, and reinvest your dividends along the way, they definitely have millionaire potential.