2 Dividend Stocks to Double Up on Right Now

Key Points

• Real estate investment trusts, or REITs, are largely trading at low valuations because of the interest-rate environment.

• Despite the beaten-down share prices, many REITs' businesses are doing extremely well.

• Two to take a closer look at right now are Realty Income and Prologis.

• 10 stocks we like better than Realty Income ›

The S&P 500 is near its all-time high, and many of the most popular stocks in the market have performed very well recently. However, some types of dividend stocks, especially real estate investment trusts, or REITs, are still looking very attractive.

Even some of the industry-leading REITs are trading well below their highs at cheap valuations and with dividend yields that are historically rare. In this article, I'll discuss two in particular -- both of which I own -- that are worth a closer look for patient income investors right now.

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Built for steady compounding

Realty Income (NYSE: O) was the first REIT I ever invested in, and I've added to my position several times over the years. Right now, it looks like an especially good time to buy.

Realty Income is a business built for steady compounding. It owns more than 15,500 properties in the U.S. and Europe, and most are occupied by tenants that are recession-resistant, e-commerce resistant, or both. Think of grocery stores, convenience stores, and fast-casual restaurants, just to name a few examples.

Not only are the tenants solid in any economic environment, but they sign long-term triple-net leases that require them to cover taxes, insurance, and most maintenance costs. All Realty Income needs to do is buy a property with a top-quality tenant in place and enjoy years of predictable and growing income.

At the current stock price, Realty Income has a 5.6% dividend yield and trades for just 13.4 times expected 2025 funds from operations (FFO) -- the REIT equivalent of "earnings." This is a historically cheap entry point into a stock with a long track record of market-beating total returns.

A logistics giant

Prologis (NYSE: PLD) is one of the largest REITs in the world and has underperformed the real estate sector in recent years. The industrial real estate giant owns 1.3 billion square feet of rentable space across four continents and, to make a long story short, conditions in industrial real estate haven't been favorable.

For one thing, this type of property was overbuilt during the pandemic years when e-commerce volume soared and logistical demands surged. Second, the higher-interest-rate environment has made it less desirable to raise capital to grow. And finally, rising rates have put pressure on all commercial real estate values, and Prologis is no exception.

Recent results look strong and suggest that Prologis could be nearing an inflection point. Core FFO increased by 9% year over year in the second quarter, and after several quarters of declining occupancy, Prologis' portfolio occupancy was flat sequentially.

There's still quite a bit of embedded rent growth in the portfolio, as evidenced by a 35% cash rent change on new and renewal leases, and management reports that its customers are "planning, engaging, and increasingly ready to act" when it comes to leasing more space. If there's a falling-rate environment over the next couple of years, as most experts predict, it could provide a huge tailwind for industrial real estate.

A great long-term entry point

To be perfectly clear, I own all three of these because I think they have the potential to generate excellent total returns over the long term -- not because I think they're cheap and will soar over the next few weeks or months. These two REITs can be rather volatile over short periods, but they all have an excellent history of smart capital allocation that should serve investors well over the long run.

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Matt Frankel has positions in Prologis and Realty Income. The Motley Fool has positions in and recommends Prologis and Realty Income. The Motley Fool recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.