The Best REITs for 2015

REITs were some of the hottest stocks of 2014. But with rising interest rates looming, what can we expect in 2015?
2014 was the best year for REITs (real estate investment trusts) since 2006. This was driven by ultra-low interest rates, with investors flocking to REITs for yield.

It was no surprise, really. REITs are a great way to collect income, given they pay out a majority of their earnings via dividends.
However, toward the end of last year, the Federal Reserve hinted that a rate hike was imminent. Again. Now, the big worry for 2015 is that if rates do rise this time, investors will start shunning REITs for fixed income investments.
Does that mean you should start selling all your REITs? Not necessarily.
One of the most respected names in the bond market, DoubleLine Capital founder Jeffrey Gundlach, made waves when he said that rates could actually go lower in 2015 than what we saw in 2014. Then, famed bond investor Bill Gross speculated earlier this week that the Fed might not raise rates in 2015.
Even still, if rates do rise, it could be a positive for REITs. Rising rates means that the economy is strengthening and there are more people with jobs, which means that rents will be on the rise—a positive for real estate investment trusts.
When you throw in the above average dividend yields, it’s hard not to consider REITs as a solid investment for 2015.
But which ones? Here are five REITs that stand out to me:

Best REITs for 2015 in Healthcare

Ventas (NYSE: VTR) is one of the largest players in this part of the industry, with a $22 billion market cap and offering a solid 3.9% dividend yield.
Its investments include various senior housing facilities, hospitals and medical office buildings. It should be a big beneficiary of the rising demand for healthcare and it has less reliance on the government than other healthcare REITs, with 80% of its revenues derived from private pay sources.
Another big winner of the increased demand for healthcare is Healthcare Trust of America (NYSE: HTA). It’s a play on office space, focusing on medical office buildings and commercial offices. It was one of the best performing REITs of 2014, with shares up 44% over the last year. Its dividend yield is 2.1%, but it has only been public for a couple years now.
For investors looking for a bit more yield, there’s also American Realty Capital Healthcare Trust (NYSE: HCT) and Medical Properties Trust (NYSE: MPW), both yielding over 5.5%.

Best REITs for 2015 in Residential

The largest player in the space is Equity Residential (NYSE: EQR), with a near $27 billion market cap. Its dividend yield is 2.7%.
But Essex Property Trust (NYSE: ESS) could be the best play in the residential REIT space. Its dividend yield is 2.5%, but shares were up 46.5% over the last year. And it has a lower debt-to-equity ratio than Equity Residential.
Essex owns a variety of multi-family properties in the Northwest U.S. and California. These are great markets to be in, where supply is constrained. Its planned acquisition of BRE Properties will also expand its presence in the apartment rental space out west.

Best REITs for 2015 in Retail

The retail space is packed with big name REITs, which includes Simon Property Group (NYSE: SPG) and General Growth Properties (NYSE: GGP), with markets caps of $58 billion and $25 billion, respectively.
However, Realty Income (NYES: O)is the name to watch here. This REIT owns more than 4,000 properties across most of the U.S., with its tenants spread across nearly 50 industries and including more than 200 companies. Its focus is on retail stores that provide non-discretionary goods.
What’s more is Realty Incomeoffers a monthly dividend, hence its nickname,“The Monthly Dividend Company.” But it gets even better: this REIT yields 4.4% and has increased its dividend for 19 straight years now.

Best REITs for 2015 in ETFs

For investors looking to take a different approach, there are always REIT ETFs.
Two of the major ETFs are the Vanguard REIT ETF (NYSEArca: VNQ) and SPDR Dow Jones REIT ETF (NYSEArca: RWR). Both have Simon Property Group, Public Storage (NYSE: PSA) and Equity Residential as their top three holdings— those three companies making up between 15% and 20% of each ETF’s total assets.
Simon Property Group develops regional malls and outlet centers across the U.S. With a $59 billion market cap, it offers a 2.75% dividend yield.
Public Storage is a $38 billion market cap REIT in the self-service storage space. Its dividend yield is 2.9%. The key for Public Storage is that it is the market leader in a fragmented industry.
Equity Residential is the national apartment REIT. Its dividend yield is 2.7% and has a $27 billion market cap. Unlike Essex, Equity Residential focuses on the East Coast.
2015 could be another great year for REITs. And the major REITs mentioned above are all poised to continue to benefit from major trends such as housing rentals, shopping and health care.

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