With volatility back in full swing, undervalued REITs or real estate investment trusts are a great option. REITs are a type of investment that allows you to purchase a stake in a real estate company. Better, since they are undervalued right now, you can get a great deal on them. In addition, undervalued REITs tend to outperform the market when it rebounds. So, investing in undervalued REITs is a great option if you’re looking for a way to profit from the bear market.
REITs come in many different sizes and serve many industries. They do not just specialize in malls, apartments, offices, or hotels.
Each investor needs to see their portfolio and ensure the stock represents their personal requirements. Investors must carefully analyze which companies in the REIT industry are worth investing in based on their portfolios. Keeping this all in mind, let’s take a look at some of the best-undervalued REITs that are trading at great valuations and operate in fantastic industries, including:
Digital Realty Trust
American Tower (AMT)
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American Tower (NYSE:AMT) is a leading owner, operator, and developer of the United States wireless and broadcast communications infrastructure. The company owns and operates roughly 222,000 communications sites, including cell towers, rooftop antennas, and small cell solutions.
The company has a strong track record of delivering consistent cash flow and earnings growth and is well-positioned to benefit from the continued expansion of the wireless industry. American Tower also offers a competitive dividend yield of 2.71%, which makes it an attractive income investment. The REIT recently hiked its payout, and its quarterly dividend rate is now $1.47 per share, a 2.8% increase from its previous rate of $1.43. Given its undervalued status and fundamentals, American Tower is a great investment for long-term investors seeking exposure to the REIT sector.
Digital Realty Trust (DLR)
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Digital Realty (NYSE:DLR) is a data center provider, with 166+ data centers in various regions worldwide. This global presence means it can offer tailored solutions to individual client needs.
The company’s portfolio of properties consists of approximately 300 buildings and more than 35 million rentable square feet. Digital Realty’s customer base includes domestic and international companies across various industries, such as content and bandwidth providers, cloud and information technology, financial services, and manufacturing companies.
We’re coming off a rough year for the technology sector, but there’s still plenty to love about data centers. The data center market is booming, and the projected revenue is set to reach $321.40 billion by 2022. With an annual growth rate of 5.01% from 2020 to 2026, the market volume will be $410.40 billion by 2027, according to data from Statista.
Prologis (NYSE:PLD) is a great pick for investors because it operates in a growing sector. The company provides solutions for both logistics and distribution needs. It’s well positioned to take advantage of the trend of e-commerce and has an international presence, too.
The company’s second quarter was better than expected, partly because of the post-pandemic demand. Considering these factors, Evercore ISI Group analyst Steve Sakwa recently upgraded the industrial REIT to Outperform. They state that its prosperous balance sheet and high-quality portfolio will help it stay afloat during the current economic downturn.
In addition, Prologis is a REIT, which means it offers investors high dividend yields and the potential for capital appreciation. Prologis is a great pick for long-term investors who are looking for exposure to the logistics sector.
Ventas (NYSE:VTR) owns and operates a diversified portfolio of seniors housing and healthcare properties, including skilled nursing facilities, assisted living facilities, independent living facilities, memory care facilities, hospitals, and other medical office buildings. It is one of the largest REITs in the healthcare sector and offers investors a unique way to play the aging population trend.
VTR’s real estate portfolio is vast and includes 1,200 senior housing properties as well. The REIT either leases these to tenants or contracts out independent third-party managers for their upkeep. The pandemic did the company no favors. However, since then, occupancy rates have bounced back. Occupancy rates increased significantly in the second quarter of 2022 to 83.7%, as opposed to March 2021, when occupancy rates had fallen to 78%.
During and after the second quarter of 2022, Ventas strengthened its liquidity by refinancing its debt and preparing for upcoming payments. The company also received positive credit ratings due to its strong financial position.
Realty Income (O)
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Realty Income (NYSE:O) owns and operates single-tenant, free-standing commercial properties. The company has leased a diversified portfolio of spaces to national and regional retailers, restaurants, movie theatres, service providers, and other businesses. Realty Income is a triple net lease company, which means the tenant pays for all property taxes, insurance costs, and maintenance.
This provides Realty Income with a stable and predictable stream of income. In addition, the company has a strong balance sheet and a long history of profitability. Realty Income is a well-respected name in the commercial real estate industry, and institutional investors widely hold its stock. Realty Income is a good option for investors seeking exposure to the commercial real estate market.
The strategy of Realty Income is to generate stable and growing monthly dividends from its investments. It has an impressive record of paying 625 consecutive monthly dividends.
Iron Mountain (IRM)
Iron Mountain (NYSE:IRM) was once famed for storing paper products. However, now things are taking a turn. It is now focusing on data centers since that is where most of the action lies. Iron Mountain has realized that for the company to stay afloat and relevant, it must focus on what is trending and in demand, which data storage currently is. Iron Mountain has easily made this transition and switch and looks forward to helping other companies with their data needs in the coming years.
For the last few quarters, Iron Mountain’s investments in digitalizing its storage business are starting to pay off. That creates a more stable foundation for the company’s increasing dividends, which should lead to higher future returns. That makes Iron Mountain an attractive option for passive income seekers.
However, IRM is down by double digits in the last six months. Aside from the general bearish momentum, shares are also treading downwards after revealing Project Matterhorn’s growth targets. The company is targeting $7.3 billion in annual revenue for 2026, representing a 10% compounded annual growth rate, and the project will play a big part. But the company will need to cover $150 million in one-time costs from 2023 to 2025. This is needed for transformation support as well. The markets don’t seem to be happy with that. Nevertheless, it means Iron Mountain is among the best undervalued REITs right now.
Rayonier (NYSE:RYN) is attractive because it’s involved in a critical commodity aside from being a REIT. It does not own office space or recreational properties. Instead, it owns huge tracts of timberland.
Rayonier is one of the largest timberland owners in the world, with nearly three million acres of land under its control. The company’s holdings are located in the southern and northwestern United States and New Zealand.
Rayonier benefits from the business model on two levels. First, due to the boom in commodity prices we are experiencing, timber prices will remain high for some time to come. Secondly, the underlying value of the land will continue rising on a secular level, becoming a hedge against inflation. It allows the company to maintain a very healthy dividend, which it hiked 5.6% in May.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.
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