Two Stocks Offering Generous Dividends Worth Considering Before Prices Surge Again
The stock market has been on a roll in recent years, with the S&P 500 boasting a staggering 50% return between 2023 and 2024. This market momentum didn't spare the S&P 500 from hitting a record high upon this article's publication date. However, not all sectors have witnessed the same level of success. Real estate investment trusts, or REITs, are a prime example, struggling to keep pace with other market segments.
Part of the issue lies in the interest rate sensitivity of REITs. Higher interest rates can increase borrowing costs and decrease the value of commercial properties owned by these trusts. Two REITs that stand out are Realty Income and Ryman Hospitality Properties, which may offer attractive investment opportunities due to their current lowered prices.
Realty Income, one of the largest U.S. REITs, focuses on net-leased properties, earning most of its income from retail businesses. Although it has high exposure to retail, Realty Income's clients operate in recession-resistant or e-commerce-resistant sectors, such as dollar stores, warehouse clubs, and convenience stores, which can mitigate some risks.
Despite its retail exposure and a share price still below its pre-pandemic high, Realty Income's business performance has been solid. Its funds from operations (FFO) have grown by around 22% per share in the past five years. Additionally, the company's balance sheet and overall business strength have shown improvement, giving hope to long-term investors.
Ryman Hospitality Properties, in contrast, has managed to buck the REIT trend despite the interest rate challenges. Its 2022-2023 performance, marked by rising interest rates, saw Ryman gain approximately 26%, while the S&P 500 fell slightly. The company's focus on large-scale, group-focused hotels has helped it weather market turmoil. Its Gaylord brand properties have garnered interest in conventions and conferences, and the company's entertainment business has also grown.
The future looks promising for Ryman, with strong financial performance and expansion plans. The company recently announced plans to add 108,000 square feet of meeting space to its flagship Gaylord Opryland property, strengthening its competitive position. Ryman's stock has retreated by around 15% from its recent highs, presenting investors with an opportunity to dive deeper into this high-potential business.
Investors looking for long-term opportunities should consider these well-performing REITs. Although interest rate volatility can pose challenges, both Realty Income and Ryman Hospitality Properties have proven their resilience in the face of adversity. Their growth strategies, financial strength, and attractive dividend yields make them appealing choices for income-seeking investors looking for compelling total return opportunities.
Given the current market conditions and the interest rate sensitivity of real estate investment trusts (REITs), some investors might be hesitant to invest in this sector. However, two REITs, Realty Income and Ryman Hospitality Properties, have shown resilience and offer potential investment opportunities. Due to their lower prices, these REITs could provide attractive returns for income-seeking investors. With Realty Income's retail focus on recession-resistant sectors and a growing FFO, and Ryman's strong performance and expansion plans, these companies could be valuable additions to a diversified finance portfolio.
