High-Yield Dividend Stocks: A Hidden Gem in a Booming Market
The stock market has been on a tear, with the S&P 500 surging over 35% in the past year. However, this rally has come at a cost, as stock prices have become increasingly expensive. With the S&P 500 trading at nearly 25 times earnings, finding bargains has become a challenge. But fear not, savvy investors! There are still hidden gems waiting to be discovered.
Uncovering Value in Real Estate Investment Trusts (REITs)
One sector that offers attractive opportunities is real estate investment trusts (REITs). Two REITs, in particular, stand out for their high dividend yields and discounted valuations: Realty Income (NYSE: O) and Rexford Industrial Realty (NYSE: REXR).
Realty Income: A Diversified REIT with a High-Yielding Payout
Realty Income expects to generate between $4.15 and $4.21 of adjusted funds from operations (FFO) per share this year, with a stock price recently below $60 a share. This translates to a valuation of about 14.5 times earnings, significantly cheaper than the S&P 500. As a result, Realty Income boasts a dividend yield of over 5%, compared to less than 1.5% for the S&P 500.
A Solid Growth Profile
Realty Income’s diversified portfolio, comprising industrial, retail, gaming, and other properties, has driven its growth. The REIT’s adjusted FFO rose 6% per share in the second quarter, driven by rent growth and acquisitions. Its $9.3 billion merger with Spirit Realty has enabled the REIT to continue increasing its dividend, with a 1.6% year-over-year increase in the second quarter.
Rexford Industrial: A Warehouse Powerhouse with a Low Valuation
Rexford Industrial expects to produce between $2.33 and $2.35 of core FFO per share this year, with a share price currently over $40. This translates to a valuation of less than 17.5 times its FFO, making it an attractive buy. The industrial REIT’s focus on the southern California market has driven its growth, with a 13.1% increase in core FFO in the third quarter.
A Bright Future Ahead
Both Realty Income and Rexford Industrial are poised for continued growth. Realty Income expects to grow its adjusted FFO per share by 4% to 5% per year, while Rexford Industrial sees a combination of repositioning and redevelopment projects driving its growth. With their high-yielding payouts, growth profiles, and discounted valuations, these REITs look like screaming buys right now.
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