7 Fallen Angel REITs That Pay Massive Dividends and Fight Inflation Are On Sale Now

If you thought June was rough from an interestate standpoint, July may be just as bad. It’s pretty baked in that the Federal Reserve will raise rates this week by 75 basis points before taking a break until September. As we have noted before, the old saying of “Don’t fight the Fed” works both ways, and there is a good chance the central bank will continue to raise rates until the soaring inflation starts to slow down.

One asset class that tends to survive rate increases and inflationary times are real estate investment trusts or REITs, because as overall costs rise, so do rents and leases that REITs hold. In fact, during a recent rate-hiking cycle, REITs outperformed the Standard & Poor’s 500 by more than double. In addition, rising rates are forcing some potential homebuyers to remain in rentals, whether it be houses or apartments.

We screened our 24/7 Wall St. REIT research database looking for solid ideas that also pay large and dependable dividends. All of these have been hit hard and are offering the best entry points for long-term investors looking to add hard assets to their portfolios. While all seven of the companies we uncovered are rated Buy at major Wall Street firms, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Gladstone Commercial

This company has been hit hard as interest rates charged higher and is offering the best entry point in over a year. Gladstone Commercial Corporation (NASDAQ: GOOD) is focused on acquiring, owning, and operating net leased industrial and office properties across the United States.

Gladstone owns a diversified portfolio of 121 office and industrial properties located in 27 states and leased to 106 tenants. The company has grown the portfolio at a rate of 18% per year since the IPO in 2003. Gladstone matches long-term leased properties with long-term debt to lock in the spread to create a stable cash flow stream to fund monthly distributions to shareholders. Current occupancy stands at 96.5% and the company said occupancy has never dipped below 95.0% since its IPO in 2003.

Most importantly for investors, Gladstone has a track record of success because of strong distribution yields, occupancy greater than 95.0%, and 10-plus years of paying continuous monthly cash distributions.

Investors are paid a massive 7.86% distribution. B. Riley Securities has a Buy rating and a $23.60 price target. The Wall Street consensus target for the stock is set at $25. The last trade for Monday was reported at $19.14.

Getty Realty

Despite climate warnings, the reality is people still need gasoline for their cars, trucks and vans, and gas stations still provides those needs. Getty Realty Corp. (NYSE: GTY) is a publicly traded, net lease REIT specializing in the acquisition, financing and development of convenience, automotive and other single tenant retail real estate. As of March 31, 2022, the company’s portfolio included 1,014 properties in 38 states across the United States plus Washington, D.C.

With big footprints in both Texas and California, the company serves some of the most populated regions of the country. Last week Getty posted strong first-quarter results where funds-from-operations surpassed Wall Street expectations.

 

Shareholders are receiving a large 5.91% distribution. JMP Securities has an Outperform rating and a $32 target price. The consensus target is posted just higher at $32.75. The stock was last seen Monday at $27.73.

Iron Mountain

If you need to store data or documents, this is the company many businesses turn to. Iron Mountain Inc. (NYSE: IRM) founded in 1951, is the global leader for storage and information management services. Iron Mountain works with more than 225,000 organizations around the world, with a real estate network of more than 90 million square feet across approximately 1,450 facilities in about 50 countries. It stores and protects billions of valued assets, including critical business information, highly sensitive data, and cultural and historical artifacts.

Iron Mountain provides secure records storage, information management, digital transformation, secure destruction, as well as data centers, cloud services and art storage and logistics. The company helps customers lower cost and risk, comply with regulations, recover from disaster, and enables a more digital method of working.

Shareholders are paid a very reasonable 5.26% dividend. Barclays recently started coverage and has an Overweight rating on the shares and the price target is set at $58. That compares with a $54.33 consensus target and Monday’s closing print of $47.02.

Medical Properties Trust

This company may be offering investors the best value at current price levels. Medical Properties Trust, Inc. (NYSE: MPW) acquires, develops, and invests in healthcare facilities; and leases healthcare facilities to healthcare operating companies and healthcare providers. The company also provides mortgage loans to healthcare operators, as well as working capital and other term loans to its tenants/borrowers.

With a growing portfolio and a versatile business model, the company continues to rank high across Wall Street. Top analysts have noted that the company’s acute care hospitals’ rent coverage has increased and the company attributed the rise to better cost controls and higher patient admissions.

Shareholders are paid an outstanding 6.90% distribution. RBC Capital Markets has an Outperform rating and a $22 price target. The Wall Street consensus is at $20.29. The shares closed trading Monday at $16.80.

Simon Property Group

This real estate giant has been pounded and is offering the best entry point since last year, and is a very strong idea for investors looking to play the commercial real estate sector. Simon Property Group Inc. (NYSE: SPG) invests in the real estate markets across the globe. It engages in investment, ownership, management, and development of properties. The company primarily invests in regional malls, premium outlets, mills, and community/lifestyle centers to create its portfolio.

Through its subsidiary partnership, it owns or has an interest in about 230 properties in the U.S. and Asia. The company also has a 28.9% interest in Klepierre, a European REIT with more than 260 shopping centers in 13 countries.

Shareholders are paid a strong 6.54% distribution. The Morgan Stanley team has an Overweight rating and a strong price target of $133. The consensus price target on Wall Street is $131.33. The shares ended trading Monday at $104.03.

VICI Properties

This is the top pick across Wall Street in the net lease group and is an ideal choice for more conservative investors looking for gaming exposure. VICI Properties Inc. (NYSE: VICI) is a triple net lease real estate investment trust that was spun out of Caesars Entertainment post-bankruptcy. The company has 23 mixed-use gaming, lodging, and entertainment properties in its portfolio, and a subsidiary that owns four championship golf courses. VICI also owns about 34 acres of undeveloped land in Las Vegas that it leases to Caesars.

Much of the focus this year for VICI was on its deal to acquire the real estate of the Venetian Resort in Las Vegas with Apollo as a new tenant. Looking ahead, many on Wall Street are very positive on VICI’s embedded growth pipeline with Caesars Entertainment including a put/call on the Centaur properties in Indiana, and a right of first refusal on a Strip Asset sale for Caesars that could occur soon after a full earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs recovery.

The company recently closed a $17.2 billion deal to buy out rival gaming REIT MGM Growth Properties, which owns the real estate of 15 casinos and resorts in eight states, including seven properties on the Strip. All of MGM Growth’s properties are operated by MGM Resorts International

Investors are paid a strong 4.35% distribution. Truist Financial is very positive on the Buy rated shares and recently lifted its target price to $40 from $35. The consensus target is posted at $35.83. The shares closed Monday at $33.12.

WP Carey

This is another large net lease REIT with an attractive distribution for income buyers. WP Carey Inc. (NYSE: WPC) ranks among the largest net lease REITs with an enterprise value of approximately $18 billion and a diversified portfolio of operationally critical commercial real estate that includes 1,215 net lease properties covering approximately 142 million square feet as of September 30, 2020

For nearly five decades, the company has invested in high-quality, single-tenant industrial, warehouse, office and retail properties subject to long-term leases with built-in rent escalators. Its portfolio is located primarily in the U.S. and Northern and Western Europe, and is well diversified by tenant, property type, geographic location and tenant industry.

Investors are paid a 5.06% distribution. Raymond James has an Outperform rating to go along with the firm’s $95 price target. The consensus is set lower at $89.20. The shares closed Monday trading at $82.66.

Almost all of these top companies have been hit by rising interest rates, and the large-scale selling all across Wall Street of every sector. These top companies are all leaders in their specific real estate investment trust sub-sectors, and offer multiple ways for investors to get steady growth and be paid substantial dependable income. These companies offer investors the ability to own hard assets in a time where it’s very likely that the economy while not crashing, is already slumping.

By Lee Jackson