Prologis (NYSE: PLD) is 25% below its three-year peak. Digital Realty (NYSE: DLR) is 15% below its three-year peak. In late 2022 and 2023, when interest rate concerns were rampant, these two dividend equities were down more than 40% from their highs. Value-focused investors may feel they missed out. However, another stock market crash may create new opportunities.
Mr. Market fluctuates between optimism and pessimism, sometimes without explanation. It can be difficult to buy equities when Wall Street is down, but the best buys are often available then. When interest rates rose sharply, REITs were a good investment. Real estate investment trusts are recovering as interest rates improve.
One of the major warehouse owners, Prologis has properties on four continents. Recently, the dividend yield was 3.5%, but now it's 2.8%. A recovery to that level would make this stock interesting. The dividend has also been increasing annually for a decade. Over the past decade, it increased 11% annually. Warehouses are boring, but Prologis' portfolio is strategically positioned in key global transportation hubs, making them critical to world trade.
Three long-term virtues exist here. As a $120 billion REIT, Prologis is large. It has the scale to consolidate industries. Second, warehouse rental rates have risen dramatically in recent years, allowing Prologis to roll over expired leases at greater rates. This process is ongoing, therefore rent growth is likely. Third, Prologis has lots of empty land for warehouses. Management sees a $40 billion long-term opportunity. Buying Prologis during a market sell-off may be a good idea.
Digital Realty yields 3.2%. The yield exceeded 5% in 2023, when the stock was lowest. An appealing buying opportunity would arise if a wide market decline pushed the yield back to that top. For an amazing 18 years, the dividend has climbed annually.
The increasingly interconnected globe relies on Digital Realty's data centers. The REIT has over 300 assets in North America, South America, Europe, Asia, and Africa. Demand fluctuates, but the firm is healthy today. The fourth quarter of 2023 saw a record backlog and the biggest renewal lease signings since 2015. The fundamental draw is that the world is becoming more digital, and artificial intelligence will undoubtedly boost demand.
Overall, Digital Realty is a solid dividend stock with strong growth potential. An opportunity to return to recent lows is worth seizing.
No one knows when Mr. Market may lose his temper. When it happens, investors may sell indiscriminately. It can be tempting to follow the crowd at times like that, but if you make a small list of companies you'd buy if they were lower, you'll be more likely to seize opportunities. Given their solid underlying growth prospects, dividend climbers Prologis and Digital Realty should be on your wish list.
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