The prolonged upheaval in the stock market, which started at the beginning of last year, saw the shares of many companies fall significantly during trading. For that reason, there are many stocks around that are bargain buys these days. But which are the real deals?

Three of the most underrated companies are real estate investment trusts (REITs): Alexandria Real Estate Equities (ARE -0.90%), WP Carey (WPC -1.42%)and Tanger Outlets (SKT). Because of their low share prices, they offer particularly attractive dividend yields and compelling upside potential. This makes them seem like great places to invest $1,000 these days.

Here’s what three Motley Fool contributors have to say about these REITs.

Lab Space: This is not the office owner’s secret recipe for success

Mark Report (Alexandria Real Estate Equity): Alexandria Real Estate Equities is a REIT focused on office space, a sector that has been changed (perhaps permanently) by the pandemic. Crowds of people who began working remotely out of necessity during the pandemic continue to do so, even though the health risks are now reduced.

But it’s an office REIT with a difference. Alexandria specializes in providing laboratory and support space to life science operations and related endeavors. Among its tenants are pharmaceutical companies, universities, and research institutions, many of whose employees are often doing work that cannot be done at home.

The San Diego-based REIT went public in 1997, and since then, it has built a large collection of ancillary office complexes in the Boston, Seattle, New York, San Francisco, San Diego, and Washington, DC, metro areas and North Carolina. Research Triangle.

As a REIT, Alexandria is required to distribute at least 90% of its taxable income to shareholders as dividends each year, but over the years, this dividend machine has been a growth machine with an income side. The chart below shows what $1,000 invested in Alexandria at its 1997 IPO would be worth today. Essentially, over that time frame, it has delivered double the total return S&P 500.

The total return level is the chart

The total return level is data by YCharts.

That chart also shows the impact of the current stock market downturn on total return, which, combined with share price and dividends, and Alexandria’s fortified balance sheet, low vacancy rates, and ability to regularly raise rents, point to this stock as a valuation opportunity. .

Alexandria shares now trade at around $123, pushing its dividend yield to around 3.9%. And analysts’ consensus price target on the stock is $172.83 — about 40% higher than today’s price. Given the portfolio, performance, and prospects of this experienced REIT, this buy and hold equity seems likely to meet those analysts’ expectations.

High quality real estate for bargain basement prices

Matt Dillalo (WP Carey): Diversified REITs WP Carey trades at a lower valuation today Other REITs and the broader market. This year, the company expects to generate between $5.30 and $5.40 per share in adjusted funds from operations.FFO). With shares currently below $75, it trades at about 14 times its adjusted FFO. For comparison, a great rival Realty income Trades at about 15.5 times FFO, while many other REITs trade at 15 to 20 times their adjusted FFO, or higher. Meanwhile, the S&P 500who The price-to-earnings ratio is above 18.

There is no reason for WP Carey to trade at such a discount. It owns a high-quality real estate portfolio of operationally significant industrial, warehouse, office, retail, and self-storage properties that it leases to credit-worthy tenants. REITs use triple net leasesMost of which contain annual rent rate escalation clauses is linked to inflation. Because of that, its rents are rising faster these days than its competitors who write leases with fixed rent increases.

Thanks to its relatively low price, WP Carey’s dividend currently yields an attractive 5.8%. That’s higher than realty income (4.9%) or the REIT sector average of 4.1%. A $1,000 investment in WP Carey today would generate approximately $58 in annual dividend income.

WP Carey has increased its payout every year since its initial public market listing in 1998. As WP Carey rents increase and it acquires more income-producing real estate. That combination of income and growth should enable REITs to deliver attractive total returns for their investors over the long term.

Consumer spending remains strong

Brent Ntray (Tanger Outlets): Tanger Outlets is a real estate investment trust that focuses on outlet centres. As of December 31, it operated 29 outlet centers covering approximately 11.4 million square feet of gross leasable area. Its tenant base includes 600 different store brands in a total of 2,200 stores. The company also has partial ownership interests in six unconsolidated centers totaling 2.1 million square feet.

The outlet center concept is based on established retailers selling their products at a discount in their outlet stores. Outlet centers are usually located at a considerable distance from standard shopping malls. This encourages customers to spend more money at the outlets to make their trip more worthwhile. So far this year, consumer spending has held up reasonably well, and if that continues, Tanger will benefit.

Tanger’s 2022 core funds from operations came in at $1.83 per share. REITs use the funds from operations metric to describe their earnings rather than earnings per share as reported under generally accepted accounting principles (GAAP). This is because depreciation and amortization are large costs for a REIT, but they do not represent cash expenses. As such, funds from operations metrics give a more accurate representation of their cash-flow-generating potential.

Tanger is guiding for 2023 FFO per share of between $1.80 and $1.88. At the midpoint, this would give the company a valuation of 10.6 times this year’s FFO per share, an attractive level for a leading REIT. The company recently increased its payout to $0.245 per share per quarter, giving it a dividend yield of 5% at the current share price. A $1,000 investment in Tanger Outlets today would generate approximately $53 in annual dividend income.

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