In a Volatile Market, Investors Should Consider These 3 REITs

Volatile market swings can rattle investors who focus on growth stocks, but there's a type of stock whose prices don't tend to swing as widely as shares do in the broader market: real estate investment trusts (REITs).

REITs give investors exposure to various types of real estate holdings. Some exclusively invest in data centers, while others focus on multifamily housing or triple-net retail properties. And most offer relatively high yields.

Not all REITs can outperform the stock market while offering high yields, but these three are worth a closer look.

Digital Realty Trust is a data center leader

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Digital Realty Trust (NYSE: DLR) serves more than 5,000 customers across its 300-plus data centers. Its data centers enable general tasks, such as web hosting, data storage, and cloud computing. Not all of its data centers are equipped to handle artificial intelligence (AI) workloads, but it is a multiyear tailwind that should help soon.

The data center provider already has key relationships with tech giants, giving it a solid head start once its AI data centers are ready. Digital Realty Trust shares have shed more than 14% of their value this year despite double-digit percentage revenue growth rates and rising margins. Some investors may be spooked by the company's $18.2 billion in debt, but it continues to generate cash flow that management is using to reduce the debt over time. The stock also yields about 3.2% at the current share price.

Digital Realty Trust closed the third quarter with an $852 million backlog. Its results were good enough for management to raise its forecast for per-share core funds from operations, an important metric for REIT performance. That has been a common theme in Digital Realty Trust's earnings reports. The company hiked its 2025 forecasts for revenue and adjusted earning before interest, taxes, depreciation and amortization (EBITDA) each quarter this year.

Welltower continues to beat the S&P 500

Welltower (NYSE: WELL) is proof that some REITs can outperform the S&P 500 over the long run. This healthcare REIT owns a portfolio of more than 2,000 senior and wellness housing communities, and the stock has about tripled over the past five years. It also yields about 1.6% at its current share price.

Its revenue surged by more than 30% year over year in the third quarter. Interest income dipped slightly, but strong gains in residential fees, services, and rental income more than compensated. Operating income rose 59% to $293.1 million.

Grand View Research projects that the senior housing market will grow at a 4.42% compound annual rate from now through 2033.

Rexford Industrial Realty is a buy-the-dip candidate

Rexford Industrial Realty (NYSE: REXR) is a leading industrial REIT that prioritizes properties in Southern California. The company has high net profit margins that tend to hover near 30%. Even in the third quarter, the company delivered revenue growth while boosting its margins.

The locations of its properties position it to play an important role in commerce across the Pacific Ocean. Leading e-commerce, logistics, and retail giants work with Rexford, which contributed to its 96.8% occupancy rate across its same-property portfolio. With 420 properties now, the REIT has more than tripled its dividend during the past decade.

The stock is almost 10% below its 52-week high, but is also up by about 7% year to date, and currently sports a 4.2% yield. Commerce would have to come to a complete halt for its tenants to justify giving up their warehouses in key locations in Southern California.

Rexford Industrial Realty doesn't have a history of outperforming the S&P 500 over the long run. However, it offers a high yield and has reliable long-term tenants.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Digital Realty Trust. The Motley Fool has a disclosure policy.