May 20, 2024

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Motley Fool Issues Rare “All In” Buy Alert
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The bear market we’re currently in will eventually relent and swing back the other way, if history is to be our guide. Lessons from the past tell us there’s no time like the present to consider picking up some beaten-down stocks that could be excellent long-term buys.
Real estate investment trusts (REITs) are a good place to start. Stocks in these pools of income-producing assets provide investors the ability to profit from property they don’t directly own or manage and to pick and choose among multiple industry sectors.
Among those I own are Agree Realty (NYSE:ADC), Digital Realty (NYSE:DLR), and Prologis (NYSE:PLD). At this writing they’re yielding 4.3%, 5%, and 3.1%, respectively. Split your $3,000 equally among these diverse trusts and you, like me, will enjoy a nice flow of passive income totaling about $167 a year.

Agree Realty has held up better than most in this bear market, falling just 3% year to date while continuing to aggressively build a portfolio of net-lease properties that now numbers more than 1,600, with a presence in every state but Alaska and Hawaii.

About two-thirds of this $8.3 billion company’s revenue comes from investment-grade tenants, led, in order, by Walmart, Tractor Supply, Dollar General, and Best Buy.

Agree also pays dividends monthly and has raised that payout at a compound annualized rate of 5.5% for the past 10 years. And this retail REIT’s roster of necessity-based providers of consumer goods should continue to keep the rent rolling in and the dividends rolling out through tough times ahead.

Digital Realty doesn’t deal in consumer goods. Instead, it’s a major supplier of digital storage and movement bandwidth to many of the world’s largest consumers of such services. Indeed, this data center operator’s client list is headed up by the likes of Amazon Web Services, Google Cloud, Verizon, and LinkedIn.

It’s also on sale. Digital Realty’s stock price has plunged by more than 40% so far this year, suffering both from its association with the tech sector and concerns that big users of its services could be moving toward creating their own data centers. But a growing global network of about 300 facilities providing crucial infrastructure to such a wide range of users should be just fine.

And one nice thing about publicly traded REITs, of course, is their liquidity. You can buy Digital Realty now and bail out anytime you want later, and in the meantime you’ll enjoy steadily growing payouts from a $53 billion (in enterprise value) company that has raised its dividend for 17 straight years.

Prologis has a portfolio of about a billion square feet of logistics warehouse space across the planet and is one of the major beneficiaries — and facilitators — of the surge in e-commerce that had been building for more than a decade and then skyrocketed following the pandemic.
Fears about consumer spending slowdowns and one of its major tenants expanding its own collection of warehouses have helped drive Prologis stock down about 38% so far this year despite record-low vacancies and sharp rental increases. This industrial REIT’s dividends have also risen for nine straight years.

The $100 billion company expects that beat to go on as it moves toward sealing the deal on its takeover of its next-largest rival, Duke Realty. “As conditions normalize, we are still seeing healthy demand that rivals past peak cycles and, informed by our proprietary data insights, we expect strong demand for our properties to continue,” Prologis CEO Hamid Moghadam said in the company’s Q2 2022 earnings report.

PLD Dividend Yield Chart
PLD Dividend Yield data by YCharts
As the chart above shows, battered stock prices have driven up the yields for these REITs, especially Prologis and Digital Realty. But their consistent payouts and potential upside make all three candidates for top real estate stocks to consider buying this fall. A $1,000 stake in each of them would be a nice way to start.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Marc Rapport has positions in Agree Realty, Amazon, Digital Realty Trust, and Prologis. The Motley Fool has positions in and recommends Amazon, Best Buy, Digital Realty Trust, Prologis, and Walmart Inc. The Motley Fool recommends Tractor Supply and Verizon Communications. The Motley Fool has a disclosure policy.
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