HomeMarket News The Top 7 Undervalued REITs Worth a Second Glance

The Top 7 Undervalued REITs Worth a Second Glance

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For investors seeking to dive into the real estate sector, understanding the allure of undervalued real estate investment trusts (REITs) in April is paramount. In the backdrop of declining interest rates, a cohort of REITs stands as potential sleeper hits, armed with the ability to benefit from reduced borrowing costs and propel share prices upwards.

REITs offer a unique opportunity to partake in the real estate market sans physical property ownership. With a mandate to distribute a minimum of 90% of taxable income to shareholders in dividends, REITs emerge as attractive income channels in a low-rate market.

Besides offering enhanced income streams, REITs bring diversification merits when woven into a conventional stock and bond portfolio. The real estate sector typically showcases lower correlations with other asset classes, thereby mitigating overall portfolio volatility.

Embark on a journey to uncover seven of the most undervalued REITs beckoning U.S. investors in the month of April.

Innovative Industrial Properties (IIPR)

A close-up shot of a marijuana growhouse. cannabis trends

Source: Shutterstock

Innovative Industrial Properties (NYSE:IIPR) homes in on properties tailored for regulated cannabis facilities, boasting a generous dividend yield of 7.3%.

The cannabis segment may have been sluggish in its initial strides, facing regulatory impediments. However, its long-term growth prospects shine a ray of hope on IIPR’s potential undervaluation.

Amid financial tidings, the company raked in $30.6 million in net income in Q3 of the preceding year, equating to $1.20 per diluted share. Bolstering its portfolio, IIPR broadened its horizon through property acquisitions and lease amendments.

Of importance is its financial stride in Adjusted Funds From Operations (AFFO), a cornerstone metric for REITs. In Q3 2023, IIPR tallied an AFFO of $65 million, marking a 7.5% surge from the previous year and denoting cash flow post-expenses earmarked for property upkeep and enhancement.

National Health Investors (NHI)

A nurse is helping an older woman. Elder care. Senior care.

Source: Rido / Shutterstock

A healthcare-centric REIT, National Health Investors (NYSE:NHI) boasts a diverse assortment of senior housing and skilled nursing facilities, offering a yield of 5.97%.

In the upcoming year, NHI anticipates a 2.6% uptick in Funds Available for Distribution (FAD) relative to the preceding year. Although 2023 showcased a mixed bag for NHI’s performance, with a decline in net income per share contrasting with a rise in NAREIT Funds From Operations (FFO) year-on-year.

The rationale underpinning NHI’s undervaluation lies in its modest valuation ratios, trading at a meager 19 times earnings and 9 times sales. Comparatively lower than its peers, this suggests a potential bargain-hunting opportunity.

Further bolstering the bullish thesis on NHI is the analysts’ forecast of a 7% upswing in the company’s EPS the following year, a significant surge propelling it beyond $3 per share.

Modiv Industrial (MDV)

hands at a desk near a laptop computer, with one hand holding a pile of hundred dollar bills. Bank stocksSource: shutterstock.com/CC7

Modiv Industrial (NYSE:MDV) directs its focus towards single-tenant net-lease industrial properties, boasting a dividend yield of 6.96%.

MDV’s real estate assets surpass the $600 million mark, enveloping over 4.5 million square feet of aggregate leasable area. The company’s strategic pivot towards single-tenant net-lease industrial properties continues to position it uniquely in the real estate spectrum.

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