Two Dividend-Rich Stocks That Offer Attractive Investment Opportunities in November
The financial market has experienced a significant bull run over the past year, with the stock market surging over 35%. Consequently, stocks are becoming increasingly expensive. At present, the S&P 500 is trading at around 25 times its earnings, an increase from its 20 times earnings ratio at this time last year. While investment opportunities may appear scarce, there are still lucrative deals available if one knows where to look.
For instance, various real estate investment trusts (REITs) are trading at bargain prices, such as Realty Income and Rexford Industrial Realty. With dividend yields of 5% and 4% respectively, they are attractive income-generating investments.
Encouraging total return potential
Realty Income anticipates generating a range of $4.15 to $4.21 of adjusted funds from operations (FFO) per share this year. Given its recent share price of under $60, the REIT trades at around 14.5 times its earnings, considerably less than the S&P 500. This significantly lower valuation contributes to Realty Income's higher dividend yield.
The REIT, with its diverse property portfolio inclusive of industries like retail, gaming, and others, has reported solid growth. Its second-quarter adjusted FFO rose 6% per share, primarily due to rental growth and acquisitions, including the $9.3 billion merger with Spirit Realty. This allowed the REIT to maintain its dividend increase, reaching 1.6% year over year in the second quarter.
Realty Income believes it will continue its growth, aiming for a 4% to 5% annual expansion of its adjusted FFO per share. This growth should enable the REIT to keep raising its dividend, a feat it has managed to accomplish 127 times since its 1994 public debut. The combination of its high-yielding payout, continuous growth, and affordable valuation makes Realty Income a promising investment with the potential for double-digit annual total returns.
Robust inherent growth drivers
Rexford Industrial predicts producing between $2.33 and $2.35 of core FFO per share this year. Trading at less than 17.5 times its FFO, the REIT currently offers a relatively low valuation for its growth potential. This low estimation is responsible for Rexford's current nearly 4% dividend yield.
The industrial REIT focusing on the southern California market displayed remarkable growth in its third-quarter core FFO. It grew by 13.1%, with the help of acquisitions, resulting in a 5.4% per share growth when considering stock sales dilution. The company benefited from a surge in rent growth, with comparable rental rates increasing by 39.2% due to strong demand for warehouse space in Southern California amid supply constraints. Rexford has also closed $1.4 billion in new investments this year.
Rexford indicates that it will continue growing rapidly. The industrial REIT plans to generate growth through repositioning and redevelopment projects, along with rental increases and the capture of higher market rates as legacy leases expire. It announced new investments to enhance its net operating income by 34% through the third quarter of 2027, not considering potential acquisitions' impact. With a conservatively managed balance sheet, Rexford has the financial flexibility to pursue further accretive investments.
Rexford's visible growth potentials should enable it to sustain a substantial increase in its dividend. Since 2016, Rexford has exhibited an average 18% compound annual dividend growth, surpassing the industry average of 11%. The warehouse owner presents investors with an enticing income stream and growth profile at an attractive price, making it an attractive buy proposal.
Despite the S&P 500 being expensive with a high earnings ratio, investing in real estate investment trusts (REITs) like Realty Income and Rexford Industrial Realty may still offer lucrative returns. Realty Income, trading at a lower valuation than the S&P 500, has a higher dividend yield of 5% due to its lower earnings multiple and anticipated solid growth, making it a promising investment with potential for double-digit annual total returns. Similarly, Rexford Industrial, with a low valuation and a nearly 4% dividend yield, has shown remarkable growth in its third-quarter core FFO and plans to continue growing through repositioning and redevelopment projects, making it an attractive buy proposal for income-seeking investors.
