As interest rates have risen, dividend stocks have fallen out of favor with investors. That’s because many safer investments like Treasuries and CDs offer attractive yields with lower risk profiles.
However, the decline in many dividend stocks has them offering a compelling investment opportunity. They boast higher dividend yields and attractive upside potential. Four that stand out as consensus buys right now, according to Wall Street analysts, are REITs Realty Income (O -0.73%), Iron Mountain (IRM -0.86%), Healthpeak Properties (PEAK -1.35%), and VICI Properties (VICI -0.24%).
The financial strength to continue growing
Shares of Realty Income have fallen about 18% from their 52-week high. That has the stock trading down near $61 a share. At its current dividend rate, Realty Income yields an attractive 5%.
Analysts expect the REIT will increase that payout by about 7% through 2025. Realty Income has already given its investors two raises this year and increased its payout for more than 100 straight quarters.
Realty Income has earned a buy rating from 56% of analysts following the company, according to data from FactSet. They have an average price target of around $70 a share, giving it about 14% upside potential from the recent price. One factor driving that bullishness is the company’s top-tier balance sheet, which Scotiabank analyst Greg McGinniss recently called a “competitive advantage.” The company has better access to credit than many rivals, positioning it to take advantage of opportunities to make acquisitions in the current environment.
A data-powered dividend
Iron Mountain stock has fallen about 8% from its 52-week high, driving the share price down to around $53. It offers a dividend yield of about 4.7% at that price point.
Analysts believe the specialty REIT focused on secure storage properties can grow that already sizable payout by about 15% through the end of 2025. A big growth driver is its investments in building data centers. The company expects its adjusted funds from operations (FFO) to grow by about 4% this year. Iron Mountain also boasts its best balance sheet in years. It ended last year with leverage down to 5.1 times, its lowest level since 2017. That gives it the additional financial flexibility to grow the dividend while investing in its continued expansion.
Iron Mountain has a buy rating from 78% of analysts who follow the company. Their average price target is $56 a share. Some analysts have an even higher target, including Barclays’ Brendan Lynch, who recently increased his to $57 a share.
A healthy payout
Shares of Healthpeak Properties have plunged nearly 40% from their peak over the past year, driving the stock down toward $21 a share. That sell-off has pushed the healthcare REIT’s dividend yield up to 5.6%. Analysts believe Healthpeak can increase that payout by another 9% through 2025.
Given the significant decline in the share price, analysts see lots of upside potential. According to FactSet, it has a buy rating from 60% of the analysts who follow the company with a consensus price target of nearly $28 a share.
Jefferies analyst Johnathan Peterson is among the many with a buy rating on Healthpeak stock. Peterson upgraded shares from hold to buy in January while boosting his price target from $23 to $29. The Jefferies analyst believes Healthpeak will generate resilient cash flows and peer-leading FFO per share growth through 2025.
A low-risk wager
VICI Properties stock has slipped about 8% from its 52-week high, recently pushing shares below $33. That helped push the experiential property-focused REIT’s dividend yield up to 4.8%.
Analysts believe VICI Properties can boost that payout by about 12% through 2025. The REIT expanded it by 8% last year, representing the fifth straight year of annual dividend increases since its formation.
Analysts love the stock. It has earned a buy rating from 95% of the analysts following the company and a consensus price target of nearly $38 per share, about 15% above the recent price. Mizuho analyst Haendel St. Juste recently initiated coverage on the stock, giving it a buy rating and setting a $35 price target. The analyst believes it has one of the highest quality portfolios among REITs, which should help drive outperformance in the current macroeconomic environment as investors seek to play defense.
Attractive and growing income streams
Realty Income, Iron Mountian, Healthpeak Properties, and VICI Properties stand out as excellent income opportunities these days. The REITs all pay dividends yielding more than 4.5% that they should grow over the next couple of years. That rising income stream drives the consensus view among analysts that these REITs should trade at higher prices in the future. As a result, they could produce strong total returns, making them stand out as great buys right now.
Matthew DiLallo has positions in FactSet Research Systems, Iron Mountain, Realty Income, and Vici Properties. The Motley Fool has positions in and recommends FactSet Research Systems, Iron Mountain, and Jefferies Financial Group. The Motley Fool recommends Barclays Plc, Healthpeak Properties, Realty Income, and Vici Properties. The Motley Fool has a disclosure policy.