Best Value REITs To Buy In July

Long-term investors looking for undervalued REITs should consider solid companies with good long-term track records that, for one reason or another, have fallen out of favor with Wall Street. Over the past few years, many REITs have declined in share price because of higher interest rates which make it difficult to refinance maturing loans or to make new acquisitions. The increase in inflation has also driven up costs of maintaining properties or making improvements when tenant turnover occurs.

Some REIT sectors, such as Office and Retail REITs, have had difficulty maintaining higher occupancy rates as the COVID-19 pandemic increased the work from home movement and led to an increase in online shopping. These REITs now provide solid dividend yields for income investors, have low price/FFO ratios, and may appreciate solidly over time once the inflationary environment begins to improve. 

Easterly Government Properties Inc. 

Easterly Government Properties Inc DEA replaces Independence Realty Trust, Inc. IRT in the best value category this month, as Independence was one of the best REITs in June, gaining 16.52% and eliminating it from "best value" status.

Easterly Government Properties is an office REIT that acquires, develops and manages class A commercial properties and leases them solely to government agencies through the General Services Administration. Two of Easterly's largest tenants are VA Outpatient Centers and FBI Regional Headquarters. As of March 31, Easterly Government Properties owned 93 properties with 9.1 million leased square feet across 26 states. Its recent occupancy has ranged between 97.5% and 100% in 2024 and its weighted average lease term (WALT) was 10.4 years.

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On June 4, Easterly announced it had secured a new $400 million revolving credit facility with an option for up to $250 million in additional funds. The facility will mature in four years and have two six-month extension options. It will bear interest at the secured overnight funding rate (SOFR) plus 1.20% to 1.80%.

Easterly presently pays a quarterly dividend of $0.265, and the annualized dividend of $1.06 yields 8.68%. It has a solid history of dividend increases over the past nine years. 

The one caveat is that the payout ratio on $1.16 annual FFO is now 91%, so there won't be any dividend increases or coverage until FFO increases. 

Easterly had a total return of 4.48% in June. Its P/FFO of 10.57 is well below the office REIT sector median of 12.45, so it remains undervalued relative to its peers.

Realty Income Corp 

Realty Income Corp O is a San Diego-based, triple-net lease REIT with over 15,450 properties worldwide. The "Monthly Dividend Company," as it's widely known, is a member of the S & P 500 and an S & P 500 Dividend Aristocrat. 

On May 6, Realty Income reported its Q1 2024 earnings. FFO of $1.05 per share beat the estimate of $1.04 per share and topped FFO of $1.03 per share in Q1 2023, while revenue of $1.26 billion beat the forecast by $160 million and easily beat revenue of $865.71 million in Q1 2023.

Realty Income remains one of the foremost REITs today and with good reason. Although its performance has been lackluster in 2024, its total return since January 1995 is 1,183.08%. With a P/FFO of only 12.42 and a history of trading above $70 as recently as 2022, this very popular REIT remains an excellent value play. Its consistently increasing monthly dividend helps retirees and other income investors pay regular expenses.

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On June 3, Realty Income announced it had revised its 2024 guidance for Normalized FFO from $4.17-$4.29 to $4.19-$4.28 per share. AFFO guidance was also increased from $4.13-$4.21 to $4.15-$4.21.

On June 11, Realty Income increased the monthly dividend from $0.2625 to $0.2630 per share. It was the 126th dividend increase since the 1994 IPO — the new annualized dividend of $3.156 per share yields 6.02%. 

On June 12, KeyBanc analyst Upal Rana initiated coverage of Realty Income with a Sector Weight rating. On May 31, UBS analyst Brent Dilts maintained a Buy on Realty Income but lowered the price target from $67 to $61. That's still well above its recent closing price of $52.36. 

Realty Income had a total gain of 0.04% in June. 

Regency Centers Corp.  

Regency Centers Corp REG is a Jacksonville, FL-based retail REIT, founded in 1963 that owns and operates 482 properties, totaling more than 61 million square feet in higher-income areas, mostly on the Eastern Coast of the U.S. Its portfolio, with over 9,000 tenants, has a 95.8% lease rate and includes 80% grocery-anchored properties, along with restaurants, service providers, medical spaces and higher-class retailers. Regency Centers is a member of the S & P 500.    

On May 2, Regency Centers reported its first quarter 2024 operating results. FFO of $1.08 beat the consensus estimate of $1.03 and was equal to FFO of $1.08 in Q1 2023. Revenue of $357.46 million beat the consensus estimate of $346.96 million and topped Q1 2023 revenue of $317.977 million by 12.41%. 

On May 23, Mizuho analyst Haendel St. Juste maintained Regency Centers with a Neutral rating and bumped the price target from $60 to $61.   

On June 26, Regency Centers announced a new Fast Charging Station for electric vehicles in partnership with EVgo Inc. EVGO at Blakeney Town Center in Charlotte, N.C. Regency has developed approximately 40 of Evgo's 120+ charging stations across 10 states, and more are expected next year.

Regency performed well in June, with a total gain of 2.39%. It pays a quarterly dividend of $0.67 per share. The annualized $2.68 dividend yields 4.33%. The dividend is well covered, with a payout ratio of 64% on a forward annual FFO of $4.19. The P/FFO of 14.77 is above the retail REIT sector median of 12.45; however, Regency’s $61.86 is still well below its December high of $67.73.

Are You Missing Out On Higher Yields?

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

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Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings. 

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