3 Bear Market Buying Opportunities Investors Don’t Want to Miss
The bear market has brutalized stock prices over the past year. However, there is a benefit to falling market values: dividend yields have increased. This means that investors can secure higher income streams on some high-quality dividend stocks.
Three great income buying opportunities that have arisen in the bear market is it so Alexandria Real Estate Equities (IS IT SO 1.75%), digital reality (DLR 1.70%)Y Foreword (PLD 1.26%). Here’s why dividend-focused investors will want to take advantage of this situation.
1. Alexandria Real Estate Equities: A healthy payout
Alexandria has lost nearly 30% of its value since the market peaked in early 2022. That has boosted the real estate investment trust (REITs) dividend yield greater than 3%. It is almost double the dividend yield of 1.7% of the S&P 500 and approaching the office REIT highest level in the last five years.
While many of its peers in the office sector are facing headwinds from remote work, Alexandria is relatively immune to that trend because it focuses on owning labs leased from healthcare companies that require in-person work. Rather than hurt your business, the pandemic has increased the demand for lab space.
That is evident by the strong growth in rents. Rents for new and renewed leases signed last year were 34.3% higher than for the same space. Strong demand for lab space also allows the REIT to invest in its large portfolio of development projects. You can easily fund those projects with cash held after your dividend is covered (it has a low 56% FFO pay rate) and a balance sheet that ranks in the top 10% of all publicly traded REITs.
These catalysts should allow Alexandria to continue to increase its dividend. The REIT has increased its payment by 5% over the past year and has grown it at an annual rate of 6.5% over the past five years.
2. Digital reality: the streak must continue
Digital Realty shares are down nearly 40% from the market peak last year. That has prompted the Data Center REITs dividend yield up to 4.6%, approaching its best level since 2016.
While concerns about a slowdown in technology-related spending have weighed on the REIT’s valuation, it has yet to see any slowdown in demand. The company delivered another record quarter of bookings in the third quarter, its third record in the last four periods. That allows you to maintain high occupancy levels in your existing data centers and continue to develop new ones.
The company also continues to find opportunities to expand its global data center portfolio through acquisitions. It recently acquired a majority stake in South African data center operator Teraco for $1.7 billion.
Those growth drivers should allow Digital Realty to continue to increase its dividend. It gave investors a 5% raise last year, extending its streak to 17 straight years of dividend growth. That kept it among the elite group of REITs that have increased their payments every year since their initial public offerings.
3. Prologis: more growth ahead
Prologis shares have plunged 30% since the bear market began. That selloff helped push its dividend yield to 2.6%, near its best level in recent years.
He industrial REIT It was under pressure last year, even though it was another great year for the company. while his growth rate slowed in fourth quarter, still increased its FFO by 12.7% per share for the full year. Meanwhile, despite a weaker economy, Prologis expects its FFO per share to rise another 9.5% this year. Given its integrated rental growth and broad development pipeline, it could continue to grow at a healthy pace for years to come.
These drivers should allow Prologis to continue to increase its dividend at an above-average rate. The company gave its investors a 25% raise last year and has grown it at a compound annual rate of 12% over the past five years.
Good times to buy more income
The sell-off by Alexandria, Digital Realty and Prologis has pushed their dividend yields to their highest level in recent years. So the bear market has created great buying opportunities for investors looking for income. They can lock in a higher yield on these top-tier dividend stocks, which will likely continue to increase their payouts in the future.
Mateo Di Lallo holds positions in Digital Realty Trust and Prologis. The Motley Fool holds positions and recommends Alexandria Real Estate Equities, Digital Realty Trust, and Prologis. The Motley Fool has a disclosure policy.