Finding value in sectors such as the real estate investment trust (REIT) space can be a difficult task. Companies that have yields which are too high are often eschewed in favor of those REITs with "reasonable" yields.
Worries surrounding potential dividend cuts or payout ratios which are simply too high often lead to out of control dividend yields which are short-lived (after all, if the market is expecting a dividend cut, typically a cut becomes much more likely by default).
In many other cases, such as when a dividend paying company is hit hard, or a company operating in a given sector which is hit hard, dividend yields can climb artificially in the short term, providing long term investors who are confident in the ability of said firm to maintain or grow its distribution over time to pick up a great potential long term winner at a bargain price.
With the continued macro shift away from bricks and mortar retail and toward e-commerce, REITs such as Federal Realty Investment Trust (NYSE:FRT) have stagnated well below all-time highs (Federal Realty is still down more than 25% from its peak a few years back).
This, despite solid fundamentals, and an operating environment which remains little changed.
REITs focusing on shopping centers or retail will likely continue to stagnate, however, I would recommend investors consider picking up shares of companies like Federal Realty at discounted prices in the near term, before valuations revert toward a longer-term mean.
Invest wisely, my friends.
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