REITs Are Starting To Get Cheap Again: Get Ready To Buy These 8 Undervalued Names

Posted On March 8, 2017 9:13 pm

With the stock market still near all time highs, many investors continue to be VERY nervous, expecting a sharp correction at any time. Well, one of my favorite lessons about investing is that no matter how high the market soars something is always on sale. In this case, the Fed’s increasingly hawkish stance, specifically that it’s planning to raise interest rates on March 15th, means that rate sensitive stocks such as REITs are getting hammered.

In fact, over the past three days 10 year yields (a good interest rate proxy) are up 15 basis points, which has caused REITs to steadily drift lower, even blue chip names such as Realty Income, which is down over 3% today.

More importantly, thanks to US economic growth starting to really take off (Automatic Data Processing just reported 298,000 private sector jobs were created in January), and inflation following suit, this means that the chances of the Fed making good on its 2017 interest rate guidance, (3 25 basis point rate hikes) is now up to about 60%.  In the short-term higher rates will likely hurt REITs, which are one of my favorite high-yield dividend growth sectors.

The bottom line is that REITs are likely to become one of 2017’s best places for new capital, with already generous, and steadily rising yields, both due to weak prices, and growing dividends.

To help you get started here are some of my favorite, already undervalued REITs, from my master watch list, our DVDGI portfolio, and my own real money portfolio.

Omega Healthcare Investors (OHI): 48% undervalued
Kimco Realty (KIM): 23%
Macerich Company (MAC): 18%
Simon Property Group (SPG): 18%
Taubman Centers (TCO): 17%
Tanger Factory Outlet (SKT): 16%
Federal Realty Investment Trust (FRT): 6%
Realty Income (O): 6%

About author

Dividend Sensei
Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I'm a proud co-founder of Wide Moat Research, Dividend Kings, and the Intelligent Dividend Investor. My work can be found on Seeking Alpha, Dividend Kings, iREIT, and the Intelligent Dividend Investor. My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives. With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams and achieving long-term financial goals.

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