The real estate sector has been one of the worst-performing parts of the stock market since the Federal Reserve started raising interest rates in 2022, but this has created some opportunities to add top-quality businesses to your portfolio at historically cheap valuations. Here are three in particular that are built to deliver excellent long-term returns that are worth a closer look right now.

The right kind of retail

Realty Income (NYSE: O) is the first real estate investment trust, or REIT, I ever bought, and I’ve been building my position for well over a decade now. If you aren’t familiar, Realty Income owns a portfolio of more than 15,000 single-tenant properties throughout the U.S. and Europe, mostly occupied by retail tenants.

The stock is designed for excellent long-term returns, no matter what the economy does. Its tenants operate mostly in recession-resistant or e-commerce resistant businesses. Think of properties like supermarkets, drug stores, and warehouse clubs. Plus, tenants sign long-term leases that require them to cover taxes, insurance, and maintenance costs. All Realty Income has to do is acquire a property with a high-quality tenant in place, and then enjoy year after year of predictable, growing income.

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

A value play with tons of potential

EPR Properties (NYSE: EPR) is another REIT, but this one is laser-focused on experiential real estate. It owns waterparks, ski resorts, eat-and-play businesses (TopGolf is one of the largest tenants), and much more. But its largest property type is also its biggest risk factor, and that is movie theaters.

It’s no secret that it’s been a rough few years for the movie theater business, and this resulted in the bankruptcy of one of EPR’s largest tenants, Regal Entertainment. However, this was resolved favorably for EPR, and while there’s still quite a bit of uncertainty in the movie industry, it’s important to realize that EPR’s theaters tend to be of high quality and are generally high-performing.

EPR sees a massive $100 billion growth opportunity in its target property types in the years to come, 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 (NYSE: RHP) has been one of the best-performing real estate stocks since the Fed started raising rates, and for good reason. Its properties have come roaring back from the pandemic and are performing better than ever.

Story continues

Ryman owns six large-scale hotels that are focused on group events, mostly under the Gaylord brand name. It also owns a portfolio of entertainment assets, including iconic performance venues such as Grand Ole Opry and Ryman Auditorium, as well as the Ole Red dining and entertainment chain. In the most recent quarter, Ryman’s revenue hit an all-time high, as did its 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.

As of this writing, Ryman pays a 4.3% dividend yield, and still trades at a very attractive valuation from a long-term perspective of about 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 stocks will make you a millionaire quickly. But they can definitely help you get there over 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 the reinvestment of all dividends.

• EPR Properties went public in 1997 and has produced a S&P 500-beating 1,530% total return since then, even after the recent theater-fueled slump.

• Ryman has produced 715% total returns since it converted to a REIT in 2012.

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

Should you invest $1,000 in Realty Income right now?

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Matt Frankel has positions in EPR Properties, Realty Income, and Ryman Hospitality Properties. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends EPR Properties and Ryman Hospitality Properties. The Motley Fool has a disclosure policy.

3 Real Estate Stocks That Could Make You a Millionaire was originally published by The Motley Fool