With the bear market clawing at investor portfolios, we are seeing some higher-quality stocks get tossed out. The real estate investment trust (REIT) area has been particularly under fire given that office and retail properties are economically sensitive, and the economy appears to be close to a recession (or even in one). Some REITs have been hit particularly hard and are now trading at yields an income investor would find appealing. 

Picture of a shopping mall.

Image source: Getty Images.

The consumer is holding up despite recession fears

Simon Property Group (SPG 0.82%) is the premier mall operator in the U.S. It owns 198 properties consisting of shopping malls and premium outlets. It also owns a 80% stake in mall operator Taubman Realty. Given that the Federal Reserve is raising the federal funds rate to combat inflation, the markets fear a possible recession, which is generally bad news for retailers and by extension mall operators. 

That said, Simon's second-quarter results haven't shown any sort of deterioration, despite high gasoline prices that often act as a drag on consumer discretionary spending. Occupancy was up 2.1% year over year to 93.9%, and the company raised its forecast for funds from operations (FFO), a crucial metric for REIT performance. Mall sales volume rose 7%, and sales per square foot hit a record of $746 for the malls and outlets. The company is estimating full-year 2022 FFO per share to come in between $11.70 to $11.77 per share. At current levels, that gives Simon Property a multiple of 8.7 times expected FFO per share, which is pretty cheap for a premier REIT like Simon. 

The quarterly dividend was recently increased to $1.70 per share, which works out to an annual dividend of $6.80 per share. That $6.80 is well covered by the FFO guidance and gives the company a dividend yield of 6.4%, which is attractive for a high-quality REIT like Simon. Simon will probably remain under a cloud until the Fed is done with rate hikes and we get a better view on the holiday shopping season. That said, income investors may find the stock attractive. 

Office properties are out of favor, but SL Green has a tasty yield

SL Green (SLG 0.93%) is the biggest office REIT in New York City. It manages 50 buildings with 27.2 million square feet of office and mixed-use space. SL Green has been out of favor since the beginning of the COVID pandemic as investors have been skeptical of office REITs and SL Green in particular. Manhattan office space is expensive, and many industries are leaving the New York City area for tax reasons. In addition, work-from-home has been another drag on the company. 

While SL Green is out of favor and cheap, it isn't really in any sort of financial distress. The value of its properties net of debt well exceeds the book value on the balance sheet. The company's debt load is manageable, and interest expense is well covered. The company has said that funds from operations (FFO) per share will come in between $6.70 and $7.00 per share, which puts the multiple at 6.6 times at the low end of that range. That is pretty cheap for a REIT. In addition, the company pays a $0.311 monthly dividend, which works out to be $3.73 per year. At current levels, that gives SL Green a dividend yield of 8.4%. Given the company's FFO guidance of at least $6.70 per share, the $3.73 dividend looks well covered. SL Green is one of those companies that is cheap and may well stay cheap for a while, and there is a decent margin of safety.