What goes down must come up, right? Such logic can help drive the thinking behind taking the opportunity to invest in a beaten-down stock, of which there now are plenty.
They're not all equally wise choices, of course, but careful choosing now can yield nice gains going forward, and at least three dividend machines are available right now at what could well prove to be bargain prices.
The three here are Alexandria Real Estate Equities (ARE 3.14%), American Tower (AMT 0.36%), and Realty Income (O +0.87%). They're real estate investment trusts (REITs), owner/operators of pools of income-producing property they use to meet their legal requirement to pay out at least 90% of their taxable income as dividends.
That cash flow makes them ideal for the real estate and income portion of a balanced portfolio. But that same cash flow can make them especially vulnerable to rising interest rates, since REITs have to largely borrow instead of using retained cash to finance activities like acquisition and redevelopment.
That can help explain what you see in this chart, which includes the Vanguard Real Estate ETF as a benchmark for the publicly traded real estate industry.
The three REITs we're highlighting here, as you can see, have fared even worse so far this year than the Vanguard exchange-traded fund. That points to both their market vulnerability beyond simply financing and refinancing their acquisitions and debt load, and to the potential they have for a very nice rebound. Each has its own story to tell.
1. Alexandria Real Estate Equities
Alexandria Real Estate Equities falls into the office REIT sector, a very battered space with what many consider very dim prospects as people continue to work from home and big leases continue to expire. But the company calls itself a life science REIT with a large and growing collection of "dynamic collaborative campuses in key innovation clusters."
Those campuses are in desirable markets such as San Diego and the Bay Area in California, Seattle, North Carolina's Research Triangle, New York City, Boston, and Washington, D.C., with about 75 million square feet of space occupied by about 835 tenants.
NYSE: ARE
Key Data Points
That tenant list is anchored by major pharmaceutical and other biosciences operations and private and public research institutions that need specialized lab space. Those aren't your typical mix-and-match cubicles suitable for people who, now more than ever, can do the same work at home. However, doubts about the continued demand for even its type of hard-to-replicate space have helped drive down ARE's price.
2. American Tower
American Tower is among the largest of REITs. More critically, it owns and operates more than 225,000 traditional cell towers and other infrastructure essential to supporting digital communications around the world. It's the largest private cell tower owner in the world and has further expanded its reach by investing in data centers.
All the major mobile carriers depend heavily on AMT to carry their signals, along with thousands of other tenants, and the quickening rollout of 5G technology and artificial intelligence applications should only deepen the demand for space on this infrastructure REIT's vast network.
NYSE: AMT
Key Data Points
Along with interest rates, AMT stock has been dragged down by questions about its heavy dependence on mobile carriers and the ability to keep growing demand for its large stake in traditional cell towers.
3. Realty Income
Realty Income has a portfolio of more than 13,000 properties in all 50 states, Puerto Rico, and Europe. It's the largest of retail REITs and specializes in providing space to a rock-solid list of tenants led by many of the world's largest retailers.
Growth questions have also plagued Realty Income stock. While it can be hard to move the needle much when you're already this big, this trust has made some large acquisitions over the past couple of years -- both in its traditional business in the U.S., with expansions in Europe, and even with a couple of billion-dollar moves into U.S. gaming properties.
NYSE: O
Key Data Points
Realty Income is also one of the most reliable providers of, well, real estate income on the public markets. Self-dubbed "The Monthly Dividend Company," it's paid dividends monthly for more than 50 years and has raised the payout -- usually by very small amounts -- every year for 30 years.
AMT Dividend data by YCharts
A passive income pipeline at palatable prices
The above chart shows how steadily the three individual REITs here have grown their dividends, while paying a nice yield and decent total return over the past 10 years and providing that nice flow of passive income.
Their sagging prices have driven the yield up, of course, but with their reliable cash flow, investment-grade balance sheets, seasoned managers, strong market positions developed over decades of positive performance, and predilection for dividend increases, they could prove to be very nice additions to the income-focused, buy-and-hold portion of a long-term investor's nest egg.
