The renewed enthusiasm for stocks that has driven the emerging bull market since October has not found its way into at least one notable segment of the equities market: real estate investment trusts (REITs).
REITs are particularly interest rate sensitive, and as the cuts expected to start this year get kicked down the road, some of these owners of pools of income-producing property offer stable sources of income and long-term growth potential at particularly favorable prices.
If you have $200 to spend on dividend stocks, you could do much worse than plunking $100 each down on Alexandria Real Estate Equities(NYSE: ARE) and Realty Income(NYSE: O).
Realty Income is one of the most widely held owners of net-lease retail properties, while Alexandria develops and owns high-quality properties tailored to the life science and biotechnology industries. They both went public in the 1990s and have done well since.
This chart shows how sharply and consistently Realty Income and Alexandria Real Estate Equities have outperformed the benchmark Vanguard Real Estate ETF since the turn of the century.
ARE Total Return Level data by YCharts
A tight focus for Alexandria Real Estate Equities
Alexandria is entirely focused on owning, operating, and developing what it calls collaborative campuses that continue to benefit from high demand due to the booming biotech sector, providing it with a stable and increasing revenue stream and much less uncertainty than what is facing the office REIT business overall.
The trust now has about 73 million square feet of occupied space and space under development in and around Boston, San Francisco, New York City, San Diego, Seattle, North Carolina's Research Triangle, and suburban Maryland.
Big pharma and other major players in developing high-demand, critical medications and therapies dominate its extensive client list, including Moderna, Eli Lilly and Company, and AstraZeneca.
Realty Income expands and diversifies
Realty Income, meanwhile, is both aggressively adding to its core holdings of retail properties while diversifying geographically and across industries. Most recently, it bought Dallas-based Spirit Realty and that REIT's more than 2,000 properties in 49 states, and made a sale-leaseback deal with Decathlon SE for its 82 sporting goods stores in Germany, France, Spain, Italy, and Portugal.
Realty Income now has a collection of about 15,450 real estate properties, most of them under long-term net-lease deals with commercial clients in a long list anchored by big box retailers, dollar and convenience stores, and grocers.
The trust also had two major investments in big-name casino operations too, adding to its diversity and the cash flow it uses to continue paying its dividend -- building on a record of more than 650 straight months of payouts that justify its self-branding as "The Monthly Dividend Company."
A couple hundred dollars to just keep growing
Concerns have been raised about Alexandria's reliance on just one sector and on Realty Income growing so large that it has to make big buys to move the needle and to diversify into businesses that aren't traditionally in its wheelhouse. But I'm confident enough in both to keep them as core holdings in the growth-and-income portion of my own retirement portfolio.
That's because of their rock-solid balance sheets, proven management, and strong records in providing generally recession-resistant, must-have space for reliable, long-term tenants. This chart shows how consistent these companies' dividends have been, both in terms of yield and growth, especially since the market convulsions of the Great Recession.
ARE Dividend Yield data by YCharts
They're both attractively priced, too. Realty Income is currently selling for about $52 a share, down about 35% from the all-time high of $69.21 it hit on Aug. 15, 2022, while Alexandria is trading for about $121 a share, down a whopping 46% from its peak of $207.37 on Dec. 30, 2021.
None of this, of course, is a guarantee of future performance, but there's something to be said for keeping on keeping on with what's been working. Putting a couple hundred dollars more in my stake in these two dividend stocks is an easy decision to make since I see these as such solid buy and hold forever stocks.
Should you invest $1,000 in Alexandria Real Estate Equities right now?
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Marc Rapport has positions in Alexandria Real Estate Equities, Realty Income, and Vanguard Specialized Funds-Vanguard Real Estate ETF. The Motley Fool has positions in and recommends Alexandria Real Estate Equities, Realty Income, and Vanguard Specialized Funds-Vanguard Real Estate ETF. The Motley Fool recommends AstraZeneca Plc and Moderna. The Motley Fool has a disclosure policy.
