It can be hard to see the bright side when stocks are in a seemingly endless downward spiral. However, these sell-offs are often great opportunities for investors with long time horizons and some cash on the sidelines. That’s especially true when it comes to investing in stocks that pay dividends. The more a stock’s price falls, the more its dividend yield increases.
Many high-quality dividend stocks have seen their prices drop in recent months, making them look even more attractive to income-focused investors. Three dividend payers that stand out as tempting buys right now are real estate investment trusts (REITs) Residential Equity (EQR 0.93%), industrial deer (DEER 0.31%)Y STORE Capital (TO STOCK 0.27%).
More rental income
Shares of Equity Residential have fallen more than 20% in the last month. That has pushed apartments centered residential REITThe dividend yield from 2.7% to 3.4%. That’s more than twice the dividend yield of the S&P 500.
While Equity Residential’s share price has fallen, its underlying business is thriving. The company recently reported excellent first-quarter results, buoyed by strong demand for apartments, which boosted occupancy and rental rates. CEO Mark Parrell commented that “leasing rates accelerated faster than we expected due to exceptionally strong demand.” Meanwhile, the company is about to start its first leasing season. That puts you in a great position to increase your cash flows in the coming year.
The current strength of the apartment market recently led the REIT to increase its dividend by 3.7%. The Equity Residential payout is on solid ground even at that highest payout level. It has a relatively low dividend payout ratio for a REIT and has one of the strongest balance sheets in the industry. With rising home prices and mortgage rates, demand for apartments should remain strong, providing further support for their attractive dividend.
A big drop for a minor headwind
Shares of Stag Industrial have plunged more than 30% this year. That bombardment has prompted the industrial REITThe dividend yield of 3% to start the year up to 4.5%.
One of the factors weighing on the SOCIMI is the news that e-commerce giant Amazon (AMZN 0.25%) it has more than enough storage capacity to meet your needs. While Amazon is STAG’s largest tenant, the e-commerce giant only provides 3.2% of its annual base rent, given the overall diversification of Stag’s industrial portfolio. Meanwhile, even though Amazon has plenty of capacity, demand for industrial real estate remains strong due to growing e-commerce adoption, changes in inventory management practices and supply chain issues.
Due to those catalysts, Stag buildings continue to be in high demand. Retention of existing tenants was a strong 58.4% in the first quarter, keeping occupancy high at 97.3% while driving double-digit rental rate growth. Meanwhile, the REIT continues to find attractive acquisition opportunities. These factors should allow Stag to continue to grow its cash flow, putting its attractive dividend on even firmer footing over the long term.
An amazing income stream
STORE Capital’s share price is down nearly 25% from its peak at the start of the year. That liquidation has boosted its dividend yield from 4.5% to 5.9%. That’s nearly double the return offered by the average REIT.
That lower share price comes even though STORE Capital is firing on all cylinders. The company recently locked up some low-cost debt despite rising interest rates, giving it more funds to purchase income-generating assets. real estate profit center. STORE now expects to purchase between $1.3 billion and $1.5 billion worth of property this year, which will help increase its adjusted funds from operations by 6.3% to 8.3% per share. That’s an acceleration from its 5.7% CAGR since its initial public offering (IPO) in 2014.
That increase in rental income will allow STORE Capital to continue to increase its dividend. It gave its investors a 6.9% raise last year and has increased the payout at a 6.1% compound annual rate since going public.
A good time to add more income to your portfolio
The stock market sell-off, while challenging, is providing income-focused investors with some attractive opportunities. Shares of several high-quality REITs have plunged, boosting their dividend yields. That means investors can increase their income by buying shares of blue-chip REITs like Equity Residential, Stag Industrial and STORE Capital while they’re on sale.