The cheapest REITs to buy in July

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Long-term investors looking for undervalued REITs should consider solid companies with good long-term track records that have fallen out of favor on Wall Street for one reason or another. In recent years, many REITs’ share prices have declined as higher interest rates make it harder to refinance maturing loans or make new purchases. Increased inflation has also driven up the cost of maintaining properties or making improvements when tenants change.

Some REIT sectors, such as office and retail REITs, have struggled to maintain higher occupancy rates as the COVID-19 pandemic increased work from home and led to a rise in online shopping. These REITs now offer solid dividend yields for income investors, have low price/FFO ratios, and could appreciate significantly over time once the inflation environment begins to improve.

Easterly Government Properties Inc.

Easterly Government Properties Inc (NYSE:DEA) replaced Independent Realty Trust, Inc. (NYSE:IRT) in the Best Value category this month as Independence was one of the best REITs in June, gaining 16.52% and losing its Best Value status.

Easterly Government Properties is an office REIT that acquires, develops and manages Class A commercial properties and leases them exclusively to government agencies through the General Services Administration. Two of Easterly’s largest tenants are VA Outpatient Centers and FBI Regional Headquarters. As of March 31, Easterly Government Properties owned 93 properties with 9.1 million leased square feet in 26 states. Recent occupancy rates ranged from 97.5% to 100% in 2024 and the weighted average lease term (WALT) was 10.4 years.

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On June 4, Easterly announced that it had secured a new $400 million revolving credit facility, with the option to borrow up to $250 million in additional funds. The term of the facility is four years, with two six-month extension options. Interest is the Secured Overnight Funding Rate (SOFR) plus 1.20 to 1.80 percent.

Easterly currently pays a quarterly dividend of $0.265, and the annual dividend of $1.06 yields 8.68%. The company has a solid history of dividend increases over the past nine years.

The only caveat is that the payout ratio is currently 91% on annual FFO of $1.16, so there will be no dividend increases or coverage until FFO increases.

The story goes on

Easterly delivered a total return of 4.48% in June. Its P/FFO of 10.57 is well below the office REIT sector median of 12.45, so it remains undervalued relative to its peers.

Realty Income Corp

Realty Income Corp (NYSE:O) is a San Diego-based triple net lease REIT with over 15,450 properties worldwide. The “Monthly Dividend Company,” as it is commonly known, is a member of the S&P 500 and an S&P 500 Dividend Aristocrat.

On May 6, Realty Income reported its earnings for Q1 2024. FFO of $1.05 per share beat the estimate of $1.04 per share and exceeded FFO of $1.03 per share in Q1 2023, while revenue of $1.26 billion beat the forecast by $160 million and comfortably exceeded revenue of $865.71 million in Q1 2023.

Realty Income remains one of the leading REITs today, and for good reason. Although its performance in 2024 has been lackluster, its total return since January 1995 is 1,183.08%. With a P/FFO of just 12.42 and a price still above $70 in 2022, this highly popular REIT remains an excellent value play. Its steadily increasing monthly dividend helps retirees and other income investors cover their regular expenses.

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On June 3, Realty Income announced that it had revised its 2024 normalized FFO forecast to $4.19 to $4.28 per share from $4.17 to $4.29. AFFO forecast was also raised to $4.15 to $4.21 from $4.13 to $4.21.

On June 11, Realty Income increased its monthly dividend from $0.2625 to $0.2630 per share. It was the 126th dividend increase since the company went public in 1994 – the new annualized dividend is $3.156 per share, representing a yield of 6.02 percent.

On June 12, KeyBanc analyst Upal Rana initiated coverage on Realty Income with a sector weight. On May 31, UBS analyst Brent Dilts maintained a buy rating on Realty Income but lowered the price target to $61 from $67. That’s still well above the recent close of $52.36.

Realty Income posted a total gain of 0.04% in June.

Regency Centers Corp.

Regency Centers Corp (NASDAQ:REG) is a Jacksonville, FL-based retail REIT founded in 1963 that owns and operates 482 properties totaling over 56 million square feet in higher-income areas, primarily on the East Coast of the United States. Its portfolio of over 9,000 tenants has a 95.8% occupancy rate and includes 80% grocery stores, as well as restaurants, service providers, medical offices and upscale retailers. Regency Centers is a member of the S&P 500.

On May 2, Regency Centers reported its operating results for the first quarter of 2024. FFO of $1.08 beat the consensus estimate of $1.03 and was in line with FFO of $1.08 in Q1 2023. Revenue of $357.46 million beat the consensus estimate of $346.96 million and exceeded Q1 2023 revenue of $317.977 million by 12.41%.

On May 23, Mizuho analyst Haendel St. Juste maintained a neutral rating on Regency Centers and raised the price target from $60 to $61.

On June 26, Regency Centers announced a new fast-charging station for electric vehicles in partnership with EVgo Incl.. (NASDAQ:EVGO) at Blakeney Town Center in Charlotte, NC. Regency has developed approximately 40 of Evgo’s more than 120 charging stations in 10 states, with more expected next year.

Regency has done well in June, with total earnings of 2.39%. It pays a quarterly dividend of $0.67 per share. The dividend of $2.68 on an annualized basis yields 4.33%. The dividend is well covered with a payout ratio of 64% on expected annual FFO of $4.19. The P/FFO of 14.77 is above the retail REIT sector median of 12.45; however, Regency’s $61.86 is still well below its December high of $67.73.

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This article, “Best Value REITs To Buy In July,” originally appeared on Benzinga.com