Contrarian investors have been handed a gift this week by Mr. Market — an opportunity to buy high-quality dividend growth names on sale at multiyear lows.
Editors and financial writers clearly love “Retail Apocalypse” and “Zombie Mall” headlines. These sensational articles spin the facts to reinforce a story that attracts enormous page views — so expect to see a lot more of them.
We all know many department stores are struggling and some malls are on life support. This isn’t exactly breaking news. It was highlighted once again by J C Penney Company Inc (NYSE:JCP) poor Q1 results last week, which triggered a -14% drop in JCP shares. So, let’s totally avoid the department stores and regional malls for now.
How often do you go to the local supermarket?
Like most US households, the answer is probably at least once a week. Poor results from Macy’s, Kohls and Sears don’t change consumer behavior when it comes to purchasing milk, eggs, bread and fresh fruit.
So, why did blue-chip landlords who own some of the most successful grocery-anchored real estate sell-off like they were malls? That is a great question.
Our Contrarian Opportunity
The mispricing of grocery-anchored centers presents an opportunity to swoop in and grab some high-yield REIT blue-chips with solid long-term dividend growth track records at bargain basement prices.
The best time to buy high-quality companies is when the herd is selling, blood is in the streets, and shares get hammered down to multiyear lows. How many times have you looked back and wondered: What was I thinking? Why didn’t I buy those shares at 52-week lows?
Let’s take a closer look at three shopping center names that can be bought right now for high-yield, dividend growth, with an average 30% price upside.
These three real estate investment trusts (REITs) can afford to own the top-quality shopping centers in each local market. It is a simple business model we all intuitively understand, and it is paying impressive dividends to shareholders.
In fact, the charts below illustrate the best of both worlds. High current yield for immediate income, plus solid dividend growth which supports price appreciation averaging 30% across the board.