3 REITs With Massive Upside Price Targets

Every year, there are certain times when stock prices do not come close to reflecting the opinions of Wall Street analysts, and these times can be opportunities for investors to pick up shares that have the potential for strong appreciation.

For dividend stocks such as real estate investment trusts (REITs), often this is also a chance to acquire a beaten-down stock with a higher yield than normal. Here are three REITs whose recent prices are well below recent analyst price targets, offering a potential opportunity for massive price upside, as well as high yield.

Innovative Industrial Properties Inc. IIPR is an industrial REIT that specializes in triple-net leases and lease-backs on commercial properties with cannabis companies as tenants.

As of Sept. 30, Innovative Industrial Properties owned a total of 109 properties across 19 states, with two more under construction. Its average lease length is 15.5 years.

Since its inception in 2016, Innovative Industrial Properties has had a total return of 484.65%. However, its recent performance has been quite the opposite. Since Dec. 1, the total return on shares has been negative 23.42%. Concerns over several cannabis tenants that are having difficulty paying rent have been the main issue for Wall Street.

But on Jan. 24, BTIG analyst Thomas Catherwood maintained a Buy rating on Innovative Industrial Properties, although he lowered his previous price target from $196 to $179. Despite the reduction of the price target, there is still 98.56% upside potential from its recent price of $90.15. The $7.20 annual dividend per share presently yields 7.99%, well above its five-year average dividend yield of 3.25%.

Western Asset Mortgage Capital Corp. WMC is a Salt Lake City-based diversified mortgage finance REIT (mREIT) that is externally managed by Western Asset Management Company LLC. It acquires and manages residential real estate-related investments, such as nonqualified mortgage loans and nonagency residential mortgage-backed securities (RMBS).

Like most mortgage REITs, Western Asset Mortgage Capital has suffered a significant loss of value because of inflation and rising interest rates. The total return for 2022 was negative 51.76%. However, year to date, Western Asset Mortgage Capital has a total return of 11.96% and seems to be regaining favor with investors.

On Jan. 20, Jones Trading analyst Jason Stewart reiterated a Buy rating on Western Asset Mortgage and announced a new price target of $17.50. This represents 68.43% upside potential from its recent price of $10.39.

The annual dividend rate of $1.60 per share now yields 15.69%.

Medical Properties Trust Inc. MPW is a Birmingham, Alabama-based healthcare REIT that owns and operates 434 general acute care and other properties across the U.S. and in nine other countries. It has a total portfolio of $21.1 billion, and 62% of its properties are in the United States.

Even with a $500 million company buyback program, shares have not performed well recently. Following a one-month rally that saw shares touch a high of $14 on Jan. 24, shares have now pulled back 13.5% to a recent closing price of $12.10.

On Jan. 27, Barclays Investment Bank analyst Steve Valiquette maintained an Overweight rating on Medical Properties Trust, while lowering the price target from $19 to $17. This still represents 40.49% upside potential from its recent price.

The $1.16 annual dividend presently yields 9.59%.

Investors should remember that analysts are not always correct, and even the better ones are right only about 50% of the time. It’s wise for investors to not rely solely on the opinion of analysts but to perform their own due diligence before purchasing any stock.

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