Realty Income or Agree Realty During a REIT Sell-Off?
Yields are rising, and investors are selling REITs, opening up an opportunity to buy reliable, high-yield dividend stocks for long-term investors.
Overview
The average real estate investment trust (REIT) has fallen roughly 8% over the past three months, as of this writing. Realty Income (NYSE:O), the largest net-lease REIT, is down 14%, and Agree Realty (NYSE:ADC), a smaller, faster-growing peer, is off by 16%. The main driver of the sell-off is rising interest rates and bond yields. Dividend investors could find that this drawdown is opening up a long-term high-yield opportunity.
Realty Income and Agree are both net-lease REITs, meaning their tenants are responsible for most property-level operating costs. Very often, these REITs buy properties directly from companies that occupy them, then rent them right back under long-term leases, in what is known as a sale-leaseback transaction. These are usually financing arrangements for the seller, which gets to free up capital to invest in other things, like growing its business or shoring up its balance sheet.
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Originally published at www.fool.com.