Realty Income is built for steadily rising income, and management is doing a great job of finding investment opportunities.
Both stocks trade for relatively low valuations and could be great choices for long-term investors.
10 stocks we like better than Tanger ›
Real estate investment trusts, or REITs, aren’t exactly known for issuing surprising earnings results, but several top-notch REITs have reported stronger-than-expected occupancy, investment activity, and rent growth.
Some of the REITs that have pleasantly surprised investors also happen to be trading for relatively cheap valuations, a breath of fresh air at a time when much of the stock market is at or near all-time highs. Here are two that could be worth a closer look for long-term investors right now.
Image source: Getty Images.
Tanger Factory Outlet Centers (NYSE: SKT) is the only pure-play outlet mall REIT in the market, with a portfolio of about 40 outlet properties, primarily located along coastal and tourist-heavy areas.
In the second quarter, Tanger reported stellar 9.4% year-over-year growth in funds from operations (FFO), and all of the major portfolio metrics looked strong. Tanger’s portfolio occupancy was 96.6% at the end of the second quarter, an 80-basis-point sequential increase. And if you were worried about the health of the American consumer, it isn’t apparent in Tanger’s numbers — the average tenant had $465 per square foot in sales over the past 12 months, $27 more than a year ago.
Impressively, Tanger’s spreads on new and renewal leases was 12% during the second quarter, meaning that when a tenant renews their lease or a new tenant moves in, Tanger is making 12% more than it was previously.
In all, this was a fantastic quarter and Tanger raised its full-year FFO guidance on the strength of its results. But even now, Tanger trades for about 14 times FFO and has a 3.7% dividend yield that is nicely covered by its cash flow.
Realty Income (NYSE: O) has a portfolio of more than 15,000 single-tenant properties, most of which are retail in nature. But it’s a different type of retail than Tanger owns. Realty Income chooses tenants that sell non-discretionary products, are service-based, or that are deeply discount-oriented. Their tenants sign long-term lease agreements that require them to cover taxes, insurance, and maintenance — all Realty Income has to do is get a quality tenant in place and enjoy years of growing income.
Story continues
Realty Income’s results were solid all around. But perhaps the biggest surprise is that Realty Income is still finding plenty of attractive ways to put money to work, despite the unfavorable interest environment. In the second quarter alone, Realty Income invested $1.2 billion in properties at an average initial yield of 7.2%, and meanwhile it issued about $1.3 billion in new debt at an average interest rate of about 3.6%.
In fact, Realty Income raised its full-year investment guidance to $5 billion (previously $4 billion) and increased its full-year FFO guidance midpoint. Shares now trade for just 13.4 times expected FFO, and Realty Income pays a 5.7% dividend yield in monthly installments.
Both of these REITs are firing on all cylinders, with solid occupancy, leasing activity, and tenant performance. And both are trading for surprisingly low valuations.
One big reason is that we’re still in a relatively high interest rate environment, and this is a negative catalyst for REITs. Higher interest rates mean that it costs more to raise growth capital, and they also put pressure on commercial real estate values. But as rates (hopefully) trend lower over the next couple of years, it could produce a positive tailwind for these two excellent businesses. I own both in my portfolio (Realty Income is one of my largest investments), and both look extremely attractive from a long-term perspective right now.
The Motley Fool’s expert analyst team, drawing on years of investing experience and deep analysis of thousands of stocks, leverages our proprietary Moneyball AI investing database to uncover top opportunities. They’ve just revealed their 10 best stocks to buy now — did Tanger make the list?
When our Stock Advisor analyst team has a stock recommendation, it can pay to listen. After all, Stock Advisor’s total average return is up 1,060% vs. just 182% for the S&P — that is beating the market by 877.64%!*
Imagine if you were a Stock Advisor member when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $653,427!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,119,863!*
The 10 stocks that made the cut could produce monster returns in the coming years. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
See the 10 stocks »
*Stock Advisor returns as of August 4, 2025
Matt Frankel has positions in Realty Income and Tanger. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Tanger. The Motley Fool has a disclosure policy.
These 2 Dirt Cheap Dividend Stocks Just Reported Fantastic Earnings — Here’s Why You Should Take a Closer Look was originally published by The Motley Fool
