These dirt-cheap stocks offer an attractive dividend yield.
The stock market has had a strong rally over the past year and was regularly increased against new all-time highs. And that means that stocks are slowly becoming expensive. The S&P500 is currently trading at 24.5 times its earnings, which is above the level of under 22.5 at which it traded a year ago.
However, there are still some bargains outside if you know where to look. Many Real estate investment funds (REITs) are still incredibly cheap because the effects of higher interest rates on the subject of real estate valuation. As a result, most high dividends. Three dirt cheap REITs that you can buy now are WP Carey (WPC -0.20%), Real estate income (O -0.26%)And EPR properties (EPR 0.30%).
Back on the growth path
WP Carey at the moment expects adjusted sales between $4.63 and $4.73 Funds from operating activities (FFO) per share this year. With its share price recently under 60 dollars, the diversified REIT trades in the middle of its forecast range at 13 times earnings. This incredibly cheap valuation is the reason why the dividend yield is almost 6%. nowadaysseveral times above the S&P 500’s below 1.5% mark.
Higher interest rates are just one of the factors weighing on the REIT. It has worked to improve its portfolio over the past year by strategically exiting the office sector. Additionally, a large tenant exercised its option to purchase the properties it was leasing from the REIT. These sales have weighed on WP Carey’s adjusted FFO, causing the company to reset its dividend last year.
However, WP Carey is slowly rebuilding its portfolio. The company has agreed to invest $641 million in several industrial and retail properties by the end of June. The company is on track to acquire $1.25 billion to $1.75 billion. Of deals this year. These acquisitions should put the REIT back on a growth trajectory in the second half of 2024. This has already enabled WP Carey to increase its dividend again. With a lot of growth still ahead, it looks very attractive based on its current price and yield, especially since its valuation should increase when its earnings return to growth.
Despite headwinds from higher Prices
Realty Income, another diversified REIT, expects adjusted FFO per share to be between $4.15 and $4.21 this year. With a share price of around $62, this REIT trades for less than 15 times earnings. That’s the main reason it currently offers a dividend yield of around 5%.
Because higher interest rates make new investments more expensive for the REITIt expected to invest only $3 billion this year To expand its portfolio, excluding the completion of the $9.3 billion merger with Spirit Realty. This is down from the average of over $9 billion over the past two years.
While higher interest rates are currently a headwind for the REIT, many expect that they begin to fall later this year. That would allow the company to acquire more properties to support its steadily rising dividend. Realty Income has given investors a raise for 107 consecutive quarters. A higher growth rate could also boost its valuation.
Your ticket to an attractive monthly source of income
EPR Properties focuses on experience properties such as cinemas, attractions, and fitness and wellness properties. The specialty REIT expects its portfolio to generate an adjusted FFO of between $4.76 and $4.96 per share. With its share price at the moment around $47 per share, it will be sold for less than 10 times its FFO. This incredibly cheap valuation is the reason why monthly dividend The return is over 7%.
The REIT struggled with headwinds from higher interest rates And ongoing problems faced by some of its theater tenants after the pandemic. However, the company has pushed these problems into the past. For example, last year it entered into a comprehensive restructuring agreement with an insolvent theater tenant. Now it is could grow its portfolio, its cash flow and its dividend.
EPR properties at the moment expects to invest $200 million to $300 million in new real estate investments this year, which it will fund with free cash flow after dividend payments and its strong balance sheet. As interest rates fall, it should be able to increase capital spending. This should boost earnings growth and allow it to increase the dividend in the future.
Cheap stocks are the reason for these high dividends Income
WP Carey, Realty Income and EPR Properties are bargains these days that pay high-yield dividends. This combination of yield and low valuation could enable these REITs to generate attractive total returns in the coming years when interest rates finally begin to This makes them look like great buys at the moment before this catalyst takes effect.
Matt DiLallo holds positions in EPR Properties, Realty Income, and WP Carey. The Motley Fool holds positions in and recommends Real Income. The Motley Fool recommends EPR Properties. The Motley Fool has a disclosure policy.
