Buying shares of great companies at a good price is a genius move at any time, and the current market beatdown has left many an equity sitting in what could be prime territory for a long-term buy.
I especially favor dividend-paying stocks for their passive income and their history of helping bolster their investor appeal through hard times. Right now there are many that appear to have moved into value stock territory given their relatively inexpensive share price, consistent revenue streams, and long-term performance records.
Three that I would like to point to now are real estate investment trusts (REITs) that are particularly strong brand names in their respective sectors: logistics giant Prologis(NYSE: PLD), data center operator Digital Realty(NYSE: DLR), and retail space leader Agree Realty(NYSE: ADC).
Any or all of these three trusts can be entrusted with that $500 you're fixing to put to work for the long term.
Doing fine with FFO growth and ratios
First, let's look back at past performance, as shown in this 10-year snapshot of total returns compared with a convenient benchmark, the Vanguard Real Estate ETF, an exchange-traded fund that typically holds about 160 REITs.
Then, let's look at how they've fared over that same time in rising funds from operations (FFO), a critical metric for evaluating equity REITs because it assesses their use of cash to support the dividend payouts they're required to make to meet tax law, which requires that at least 90% of their taxable income goes to shareholders each year.
Now, let's look at their pricing. The ratio of price-to-FFO per share is a typical way to gauge how expensive a REIT might be in the market. In this respect, Digital Realty is the cheapest at about 10.3 times, followed by Prologis at 14.6 and Agree at 17 times. None of those is particularly high and the lower two especially reflect their downtrodden share prices.
Down for now, but likely not for good
Digital Realty and Prologis this year are off a whopping 38% and 30%, respectively. Agree is down only 1.1%, reaffirming the high regard the market has long held for this retail REIT and its growing portfolio of net-lease properties occupied by a who's who of investment-grade retailers.
Prologis, meanwhile, met with market disfavor amid concerns about e-commerce volume in general and specifically the dependence of its warehouse business on Amazon. For Digital Realty, the hit is from similar concerns: that its largest customers may soon move more heavily to owning and operating their own data centers.
I think those concerns may be overblown. Both Digital Realty and Prologis are so large and established in offering must-have space and services that they're likely to continue doing just fine with their own growing holdings and diverse client bases numbering in the thousands worldwide.
So, if you have $500 to put in your portfolio stocking this holiday season, splitting it three ways among Prologis, Digital Realty, and Agree Realty might make you look like a genius as you collect the dividends -- Prologis is yielding about 2.8%, Digital Realty about 4.5%, and Agree Realty about 4.2% -- and watch both the payouts and the share prices grow for years to come.
10 stocks we like better than Prologis
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Prologis wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of November 7, 2022
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Marc Rapport has positions in Agree Realty, Amazon.com, Digital Realty Trust, Prologis, and Vanguard Specialized Funds-Vanguard Real Estate ETF. The Motley Fool has positions in and recommends Amazon.com, Digital Realty Trust, Prologis, and Vanguard Specialized Funds-Vanguard Real Estate ETF. The Motley Fool has a disclosure policy.