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REIT stocks have seen some volatility in recent months due to rising interest rates and headwinds in the broader real estate market. There is also a misconception that REITs underperform when interest rates are high. An analysis of S&P Global The company’s report said that in four of the six high-interest-rate periods from 1976 to 2006, REITs posted positive total returns and outperformed the S&P 500 in half of those periods. Raymond Mathis, a REIT equity analyst at Standard & Poor’s, was also cited as one of the firm’s lead analysts. quoted REITs have outperformed the market over the past three years and have posted positive total returns every year during that time. High dividends and easy access to the lucrative real estate market have always attracted long-term REIT investors.
Investors primarily look to REIT stocks for their healthy dividends. So we decided to look at some high-yielding REIT stocks that are trading at a bargain price today and have long-term growth catalysts. We favored REITs with a dividend yield above 6% and a low forward price-to-earnings ratio (relative to the REIT sector median of 43).
Apple Hospitality REIT
Apple Hospitality REIT Inc (NYSE: REIT), a Virginia-based hotel investment company,CALL) is a monthly dividend stocks with a dividend yield of over 6%. Last month, the company reported first-quarter results that were in line with Wall Street estimates. FFO for the period came in at $0.34, while revenue jumped 5.8% year over year to $329.51 million, beating estimates of $2.16 million. The stock is down 13% in 2024 so far, however, due to headwinds in the hotel REIT sector as consumers cut back on spending due to high inflation. Apple Hospitality has over 220 hotels in its portfolio and stands out in the sector for its strong liquidity and low debt. The company’s debt-to-EBITDA ratio of 3.55 is better than over 80% of companies in the REIT sector. Apple Hospitality is also growing its footprint through acquisitions. During the first quarter, the company purchased the AC Hotel by Marriott Washington DC Convention Center for about $116.8 million. The company also said it has two hotels under contract to purchase — Embassy Suites by Hilton (for about $79.3 million) and Motto by Hilton (for about $98.2 million). Analysts expect discretionary consumer spending to pick up in the coming months following the Federal Reserve’s expected rate cuts, which would bode well for hotel REITs like Apple Hospitality. The stock’s forward P/E ratio of 15.50 is well below the REIT industry’s median forward P/E ratio of 43.
Starwood Property
Starwood Property Trust Inc (NYSE:STWD) is a Connecticut-based real estate investment trust specializing in commercial mortgages and equity investments. With a dividend yield of over 10% and a forward P/E of 8.8 as of June 28, Starwood is an undervalued high-yield real estate investment trust stock. Starwood Property is well positioned to offset real estate market volatility with its diversified portfolio. Office, a volatile segment of the sector, represents just 11% of its assets, while commercial and residential lending makes up a significant portion of the company’s business (69% of assets), in addition to infrastructure lending and servicing. The stock’s valuation is depressed in part due to Starwood Capital’s announcement that it will limit redemptions from its $10 billion non-traded Starwood Real Estate Income Trust to avoid asset sales and conserve cash. Starwood Property optimists believe that the non-traded real estate investment trust’s redemption limits should not be a concern for Starwood Property investors as it is a publicly traded real estate investment trust with strong liquidity.
During the first quarter, the company generated $191.6 million in distributable earnings, representing a 1% increase over the previous quarter. Distributable earnings per share during the quarter were $0.59, while the company is paying a dividend of $0.48 per share. This translates to a payout ratio of 81%, which is more than enough to cover the dividend.
Gaming and leisure properties
Pennsylvania-based REIT Gaming and Leisure Properties Inc (NASDAQ:)GLPI) concentrates on casinos and gaming facilities. The stock has a dividend yield of 6.7% and a forward P/E of 13.46 as of June 28. It is one of the most geographically diversified gaming real estate investment trusts with 65 facilities in 20 states. The company is known for its strong leases, with most of its current leases having renewals not coming up until 2030-2040. Last month, the company purchased the real estate assets of the Silverado Franklin Hotel & Gaming Complex, Deadwood Mountain Grand Casino and Baldini’s Casino for a combined value of $105 million.
The gap between gaming and leisure properties and the sector is wide and strong, given the high barriers to entry in the gaming market amid regulation. The company’s occupancy rate of 100% also exceeds the historical median occupancy rate of 94.8% for the S&P 500 REITs. Analysts believe that expected rate cuts from the Federal Reserve could boost U.S. gaming and casino activity due to increased disposable income, which would help stocks of gaming REITs like Gaming and Leisure Properties.
Looking for higher yield opportunities?
The current high-interest rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Some private market real estate investments offer retail investors the chance to capitalize on these high-yielding opportunities, and Benzinga has identified Some of the most attractive options to consider.
For example, the investment platform backed by Jeff Bezos has just launched its Private credit fundwhich provides access to a pool of short-term loans secured by residential real estate with a target of 7-9% net annual returns paid monthly to investors. The best part? Unlike other private credit funds, This one has a minimum investment of just $100.
Don’t miss this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga’s favorite high-yield deals.
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This item Top 3 Undervalued Dividend REIT Stocks Yielding Over 6% originally appeared on Benzinga.com
