Every so often, the market provides investors with great buying opportunities. While they're no fun if you're simply holding or want to sell, they're helpful if you're still adding to your portfolio. With the stock market slumping on inflationary and interest-rate fears this year, many stocks are trading at more attractive valuations.
One sector that has gotten hit hard is real estate investment trusts (REITs), with the average REIT tumbling by more than 11%. That sell-off is providing some great buying opportunities for long-term investors. Three REITs that stand out as attractive buys right now are American Tower (AMT 1.09%), Digital Realty (DLR 1.97%), and Invitation Homes (INVH 1.04%).
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Heavy investment in future growth
American Tower's stock price has tumbled 12% from its recent high. That pushed the data infrastructure REIT's dividend yield up to 2.1%.
That sell-off comes even though the REIT is growing at a brisk pace. Its consolidated adjusted funds from operations increased 15.4% last year, driven by higher lease rates, new tower developments, and a massive amount of acquisitions. American Tower spent $20.8 billion last year to acquire 33,000 communications sites -- mainly through the purchase of Telxius Towers -- and other communications infrastructure, including data center REIT CoreSite Realty.
These deals will drive growth in 2022 and beyond. The Telxius Towers purchase included a pipeline of 3,300 new sites the company will build over the next few years. Meanwhile, its data center acquisitions position it to capture expansion opportunities in that fast-growing sector. The company has a strong balance sheet to fund its organic expansions and to continue acquiring data infrastructure. That should enable American Tower to keep growing its dividend, which it boosted by 15% last year.
This steady grower is on sale
Shares of Digital Realty have slumped more than 15% this year. That pushed the data center REIT's dividend yield close to 3.3%.
Digital Realty's slump comes even though it has continued to deliver steady growth. The REIT has increased its core funds from operation per share at a 10% compound annual rate since 2005. Meanwhile, the company recently boosted its dividend by another 5%, its 17th straight year of giving investors a raise.
The company expects to continue growing in 2022 and beyond. Digital Realty recently agreed to purchase a majority stake in Teraco, valuing the leading African data center provider at $3.5 billion. It also made two smaller acquisitions in Africa and Europe while investing in developing new data centers worldwide. With a strong balance sheet, Digital Realty has the financial flexibility to continue expanding its data center portfolio, which should drive continued dividend growth.
Cashing in on the tight housing market
Shares of Invitation Homes are down about 10% this year. That helped push the dividend yield of the residential REIT focused on single-family home rentals up near 2.2%.
That decline comes amid a red hot market for single-family rentals. Invitation Homes reported a 17.3% increase in rental rates on new leases and a 9% growth rate on renewal leases last quarter. The REIT also continued to expand its portfolio, acquiring over 4,800 homes last year for nearly $2 billion.
The company also enhanced its growth prospects. It formed a $300 million joint venture with Rockport Group to buy high-end homes for the rental market. Invitation Homes also invested $250 million into Pathway Homes, a real estate company that helps people purchase homes. With the housing market tighter than ever and interest rates rising, Invitation Homes should continue benefiting from rising rental rates. That should enable it to continue growing its dividend, which it boosted by nearly 30% last year.
These great growth REITs are on sale
American Tower, Digital Realty, and Invitation Homes are benefiting from strong market conditions. That's enabling them to raise their rates while continuing to expand their real estate portfolios, which is driving healthy growth rates. With the recent market sell-off pushing down their valuations, these REITs look like great buys right now.
