Real property funding trusts (REITs) have been magnificent long-term investments. Over the very long run, REITs have outperformed shares. While they’ve lagged the market in recent times, a near-term catalyst may give the sector a jolt.
Several top-notch REITs, together with Agree Realty (NYSE: ADC), Prologis (NYSE: PLD), and EPR Properties (NYSE: EPR), are presently buying and selling close to 52-week lows. That makes them appear to be nice buys, given their compelling dividend yields, progress outlooks, and the potential near-term catalyst of falling rates of interest.
Solid progress regardless of rate of interest headwinds
Agree Realty’s inventory value sits about 13% beneath its 52-week-high, near its low level for the yr. That has pushed the retail REIT’s dividend yield as much as 5%, considerably greater than the S&P 500’s 1.4% dividend yield.
Higher rates of interest are the primary issue weighing on Agree Realty. They’ve pushed down actual property values and elevated borrowing prices, making it more difficult for REITs to make new investments.
However, the REIT expects to take a position about $600 million into new properties this yr, due to its robust steadiness sheet, post-dividend free money circulation, and well timed funding. That funding degree helps its view it could actually develop its funds from operations (FFO) by 4% to five% this yr.
It can ship that stable progress charge with out deviating from its core technique or growing its danger profile. That ought to allow Agree Realty to proceed growing its dividend. Meanwhile, as rates of interest fall (which may happen later this yr), it will take some stress off its inventory value and allow the REIT to ramp up its funding quantity.
A near-term slowdown
Prologis inventory presently sits greater than 20% beneath its 52-week excessive, near its low for the yr. That sell-off has pushed the main industrial REIT’s dividend yield as much as 3.6%.
The firm is battling a few near-term headwinds, which triggered it to decrease its full-year outlook. CEO Hamid Moghadam commented within the first-quarter earnings press launch:
While working circumstances are wholesome in the bulk of our markets, prospects stay targeted on controlling prices, which is weighing on resolution making and the tempo of leasing. A risky and persistently excessive curiosity charge setting, along with mounting geopolitical considerations, contribute to this indecision and its short-term impact on web absorption.
However, the corporate solely expects this headwind to final 1 / 4 or two. It stays very constructive about its long-term outlook as a consequence of robust demand tailwinds and limitations to new provide.
Prologis sees its core FFO rising by 9% to 11% per share yearly by way of 2026 (together with by round 8% this yr). That ought to allow it to proceed rising its dividend at a wholesome charge. With its headwinds prone to fade later this yr, Prologis appears like a steal close to its 52-week low.
Growing regardless of a difficult setting
EPR Properties inventory has slumped 14% beneath its 52-week excessive, placing it shut to its backside over the previous yr. The sell-off has pushed its dividend yield up over 8%.
The REIT targeted on experiential actual property has needed to gradual its funding tempo as a result of influence of excessive rates of interest on its price of capital. The firm solely expects to take a position $200 million to $300 million this yr, which is the extent it could actually fund with post-dividend free money circulation, capital recycling, and money available.
It’s investing that cash into high-return improvement and redevelopment initiatives and choose acquisitions. That’s nonetheless sufficient cash to develop its FFO by greater than 3% per share this yr. This progress outlook supported the corporate’s resolution to lift its already engaging month-to-month dividend by 3.6% earlier this yr.
EPR Properties has already lined up $220 million of experiential improvement and redevelopment initiatives it expects to fund over the following two years. As rates of interest fall, the corporate ought to have the ability to ramp up its acquisition quantity. That would allow it to develop even quicker sooner or later, permitting it to proceed growing its enticing dividend.
Buy earlier than charges begin rising
Many high-quality REITs, together with Agree Realty, Prologis, and EPR Properties, are presently buying and selling close to their 52-week lows as a consequence of persistently excessive rates of interest. Because of that, buyers can scoop up these magnificent investments at discount costs, enabling them to lock in enticing dividend yields. That doubtlessly units them as much as earn excessive whole returns within the coming years as REIT values enhance, they usually proceed rising their high-yielding dividends.
Should you make investments $1,000 in Agree Realty proper now?
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Matt DiLallo has positions in EPR Properties and Prologis. The Motley Fool has positions in and recommends Prologis. The Motley Fool recommends EPR Properties and recommends the next choices: lengthy January 2026 $90 calls on Prologis. The Motley Fool has a disclosure coverage.
3 Magnificent Stocks to Buy That Are Near 52-Week Lows was initially printed by The Motley Fool
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