6-8% Yields: Deeply Discounted REITs To Buy In June 2024

Core Viewpoint - The REIT sector has underperformed since the Federal Reserve began raising interest rates in 2022, with a total return of -21.53%, while the S&P 500 has returned 19.24% during the same period [1][2] Group 1: REIT Sector Performance - Despite the overall poor performance, many REITs show strong fundamentals, including high occupancy levels, solid balance sheets, and growing rents [2] - Few REITs have cut dividends, and those that have are positioned for growth, making the sector opportunistic for capital allocation [2] Group 2: W. P. Carey (WPC) - WPC is a diversified triple net lease REIT with significant exposure to the U.S. and Europe, featuring a 99.1% occupancy rate and a weighted average lease term of 12.2 years [3] - 54% of its rent is linked to CPI, providing resilience in high-inflation environments, and it has a BBB+ credit rating with $2.8 billion in liquidity [3] - WPC trades at a 6.3% forward dividend yield and a low price-to-AFFO ratio of 11.66 times, indicating a margin of safety [3] Group 3: EPR Properties (EPR) - EPR has a higher risk profile with 37% of its portfolio in theaters but is diversifying by selling assets and investing in other types [4][5] - It offers an 8.3% dividend yield and trades at an 18% discount to NAV, with a price-to-AFFO ratio of 8.46 times [4][6] - EPR's portfolio has a 99% occupancy rate and a 12-year weighted average lease term, with a well-covered dividend payout ratio of 75% [5][6] Group 4: Realty Income (O) - Realty Income focuses on essential retail properties and has a long track record of dividend growth, with a 4.3% CAGR over 30 years [7] - It has a 6% dividend yield and is positioned to deliver an 8% annualized total return, with potential for higher returns through growth [7] - Realty Income trades at a 12.55 times price-to-AFFO multiple, significantly lower than its historical averages, and has a strong credit rating of A- [7] Group 5: Investor Takeaway - The REIT sector presents significant opportunities due to attractive valuations and strong fundamentals [8] - W. P. Carey is favored for its balanced risk-return profile, while EPR Properties is suitable for aggressive investors, and Realty Income is ideal for retirees seeking safety and yield [8]