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4 Reasons To Cry Now Laugh Later With Spirit Realty

4 Reasons To Cry Now Laugh Later With Spirit Realty

Introduction: Finding Opportunities Amidst Market Challenges

The REIT sector has faced challenges in the stock market over the past year, but as an experienced investor, I see these challenges as opportunities. Patience and a cool head are essential in times like these. Despite the recent downturn, there are high-quality stocks trading at a discount, like Spirit Realty Capital (NYSE: SRC). In this article, I’ll explain why I believe SRC stock is a buy.

#1: The Dividend – A Reliable Income Stream

I personally love collecting dividends. It’s satisfying to see them hitting my brokerage account every month. Right now, real estate has been out of favor due to rising rates. However, SRC offers a dividend yield above the average at 7.28%. Including dividends, REITs’ 3 and 5-year returns increase significantly compared to the market. Plus, SRC recently raised its dividend and has a low payout ratio, making it an attractive choice.

#2: Impressive Portfolio Diversification

SRC’s portfolio offers diversification and stability. With properties located in high-growth regions like Texas and Florida, and leasing to reputable companies like L3Harris Technologies and FedEx, SRC has a strong tenant base. The industrial properties are especially valuable, generating over $100 million in revenue with long lease terms. This diversification and stability contribute to the overall strength of SRC.

#3: Strong Balance Sheet – A Sound Foundation

Spirit Realty boasts an impressive balance sheet, with an investment grade rating from major agencies and fixed-rate debt with no maturities until 2025. The company also has ample liquidity and a conservative debt-to-EBITDA ratio. These factors provide stability and resilience, even in uncertain times.

#4: Undervalued – A Bargain Opportunity

Considering SRC’s low valuation and high dividend yield, it’s rare to find a stock with such attractive metrics. With a strong balance sheet, diversified portfolio, and low payout ratio, SRC appears undervalued. Based on my analysis using the Dividend Discount Model, I estimate a price target of $45.50, indicating potential growth for investors.

Risks to Consider

Like any investment, there are risks to consider. Tenant defaults and increased interest rates can impact REITs, including SRC. However, SRC has a diverse tenant base, and its debt maturities are well-staggered. The company also has a plan in place to handle potential challenges, such as refinancing if interest rates rise. It’s important to weigh these risks alongside the overall strengths of the company.

Conclusion: Seize the Opportunity with Spirit Realty

Despite the challenges faced by the REIT sector, Spirit Realty offers investors a high and secure yield. With a strong balance sheet, low payout ratio, and promising growth potential, SRC stock is a great buy. As treasury rates normalize, sentiment is likely to shift in favor of REITs. Investing in SRC now positions investors for potential upside to its price target. So, don’t miss out on this opportunity to invest in Spirit Realty and reap the rewards.