With panicked investors in full retreat, we’re left with three ridiculously cheap opportunities that could outpace the market in coming months.
Best of all, the three of them offer respectable dividend yields, with one above 8%.
However, before we jump into them, let’s discuss why markets may be heading higher.
Fears of a Recession are Overblown
Growth forecasts are now rising, and the economy looks nowhere as bad as the bond market yields would have us believe. For example, even with all of the chaos this summer, consumers have remained resilient– and they’re spending.
July 2019 retail sales jumped 0.7% month over month, for example.
Excluding autos, retail sales were up a robust 1.0% in July — an encouraging sign.
Even homebuilder confidence just increased, as mortgage rates pulled back. Builder confidence for single-family homes hit 66 in August 2017 – a point higher month over month. As long as that number is above 50, it’s a positive.
Better, it appears the global trade war may finally be cooling off.
For one, President Trump just extended a reprieve to Huawei, allowing it to buy supplies from US companies so that it can continue servicing existing customers. An extension will renew an agreement that was set to lapse, allowing the Chinese company to maintain existing networks and provide software updates to Huawei handsets.
Two, the President just delayed the 10% tariff on Chinese goods until December 2019. And three, the U.S. and China are set to speak again very soon about a resolution.
All of that could send markets higher from excessively oversold conditions.
Better, now that everyone is starting to get over the fear of a recession, smart investors are jumping into oversold assets with dividend yields to boot.
When we refer to oversold conditions, we’re talking about assets where selling pressure has become far too overdone.
It’s at these levels where sellers begin to become exhausted.
As even Warren Buffett will tell you, “Be greedy when others are fearful.”
With the U.S. economy set for strong growth, some of the best, high-yielding opportunities can be found in real estate investment trusts, or REITs.
Granted, most REITs bucked the latest trade war-induced market fiasco, and ran higher.
- Lexington Corp. Properties Trust (LXP) is up 29% to date
- Bluerock Residential Growth (BRG) is up 35% to date
- Sabra Healthcare REIT (SBRA) is up 35% to date
Even the Vanguard Retail Estate ETF (VNQ) is up 25.2% on the year, as compared to a paltry gain of just 18% for the S&P 500.
Fact is you’ll make more money from a REIT than you will with your average stock or bond, as we noted here. They also have a strong history of outperforming in times of rising and falling interest rates. In addition, slowing global growth is quickly forcing investors into more defensive investments that carry consistent income, like a REIT.
However, some REITs did see pullbacks, as panicked investors fled the markets out of fears of an impending recession. But those pullbacks are now offering us the opportunity to buy solid REITs on the cheap with respectable dividend yields.
Cashing in on Aging Boomers with the CareTrust REIT
CareTrust (CTRE) is a small fish in an ocean that is senior housing and healthcare real estate. At the moment, it owns around 250 properties.
What we like with CTRE is the latest pullback into oversold territory. After rocketing from a 2019 low of $17.93 to $25.50, the stock took a hit with the trade fiasco. However, the REIT appears have found solid support, and is just beginning to pivot higher.
On top of that, the REIT has seen solid growth in recent quarters.
In fact, net income of $19.7 million, a quarter-over-quarter was an increase of 48%. Plus, normalized FFO of $33.1 million, a quarter-over-quarter was an increase of 35%.
Granted, CTRE only offers a yield of 3.8% but the pullback in this REIT is overdone. We must also consider that demand for healthcare facilities is only rising as the U.S. population ages. In fact, the double-digit growth at CTRE demonstrates its strong ability to continue profiting from this growing demographic trend.
Opportunity in an Oversold Shopping Center REIT
Kite Realty Group Trust (KRG) is another beaten down, oversoldoversold REIT with a sizable dividend yield of 8.5%. While many investors have avoided the retail REIT sector in which KRG operates, we have to consider that malls are now transitioning to a community center model, anchored by restaurants, grocers, entertainment, and other specialty stores.
That has allowed REITs like KRG to thrive.
Its most recent retail leased percentage just increase 10 basis points to 95.1%. Small shop leased percentage was 92%, an increase of 40-basis points. It also executed 176 new and renewal leases, representing more than 1.1 million square feet through June 2019.
The best part – KRG’s yield has increased every year since 2014. Granted, retail REITs may look a bit scary at the moment, but even in this currently depressed retail market, KRG is still offering a generous dividend yield at a reasonable share price.
Stability with a $1 Trillion Industrial Market Opportunity
STAG Industrial (STAG) is another standout oversold REIT with plenty to like.
The company leases industrial buildings to single tenants and has a well-diversified portfolio. With an average lease length of five years that’ll help keep its 5% dividend yield intact. It doesn’t hurt that the industrial space is a trillion-dollar market opportunity.
Growth doesn’t appear to be a problem here either.
In fact, the REIT just reported 10 cents of net income per basic and diluted common share for the second quarter of 2019, as compared to $0.09 of net income per basic and diluted common share for the second quarter of 2018. It also achieved $0.45 of Core FFO per diluted share for the second quarter of 2019, equal to the second quarter of 2018.
“STAG has had an impressive first half of the year,” said Ben Butcher, CEO of the Company. “The strength of the industrial market continues to provide an attractive backdrop as the Company executes across the organization. Robust operating metrics reflect the strength of our portfolio and increased acquisition guidance speaks to the attractive opportunity to continue to grow our industrial portfolio.”
The latest pullback on market fear makes STAG even more attractive.
Revealed: 2 Urgent Buys for Triple Digit Gains – and 8.9% Dividends
Most of us can’t afford another financial crisis, especially as we head into retirement.
Unfortunately, given the unpredictability of the trade war, and potential volatility of the 2020 presidential election, further chaos is likely.
All of which could prove to be disastrous for the average portfolio – AGAIN.
Instead, what we want is the predictability and safety of knowing we’ll be paid consistently.
It’s why we’ve been pounding the table over very high-yielding REITs – many of which pay out 8.9% dividends. With those kinds of yields, you no longer have to concern yourself with the wild fluctuations of the market.
And you can retire in peace.