Black Friday Stock Sale: Down 12% to 25%, These 3 Dividend Stocks Are Great Bargain Buys Right Now

The S&P 500 has rallied by more than 25% this year. As a result, the average stock in the index now trades at nearly 25 times earnings, up from less than 20 times earnings at this time last year. That has pushed the index's dividend yield from 1.7% to near a 20-year low of around 1.2%. Because of that, it's getting harder to find bargains or attractive income investments.

However, while the prices of most stocks have risen this year, the market has tossed a few high-quality dividend stocks in the discount bin. Shares of Alexandria Real Estate Equities (NYSE: ARE), Rexford Industrial Realty (NYSE: REXR), and W. P. Carey (NYSE: WPC) are down by between 12% and 25% this year, which has pushed their dividend yields higher. That makes them great bargain buys right now for those seeking both income and upside potential.

A healthy dividend

Alexandria Real Estate Equities has lost about 12% of its value this year. That decline lifted the dividend yield of the real estate investment trust (REIT) to more than 4.5%.

The REIT, which focuses on offices and other properties for companies in the life sciences space, has a great dividend track record. It has grown its payouts at a compound annual rate of 5.4% since 2020. It currently has a low payout ratio of 55%. The company also has a strong balance sheet that's in the top 10% of all REITs.

Alexandria is using its financial flexibility to grow its portfolio of income-generating life sciences facilities. The company has almost 5 million square feet of additional space under construction. It has already leased or is negotiating leases on 55% of this space, giving it a lot of visibility into its future income growth. The REIT expects to add $510 million of annualized net operating income (NOI) over the next several years as it completes these projects and they stabilize. That's healthy growth for a company currently producing about $2 billion in annualized NOI. The REIT also has the financial flexibility to acquire additional properties as accretive opportunities arise. These investments should allow Alexandria to continue growing both its high-yielding dividend and its share price.

Built-in growth

Rexford Industrial Realty has lost about a quarter of its value this year. That has driven the industrial REIT's dividend yield up to 4%.

The company has grown its payout at a 15% compound annual rate since its IPO. But it has raised its payouts even faster over the last five years -- a phenomenal rate of 18% annually, well above the 11% average growth of its peer group.

Rexford Industrial Realty also has a lot of visible growth ahead. The company expects a combination of repositioning and redevelopment projects, rent growth (embedded in its leases and capturing higher market rents as legacy leases expire), and recently secured acquisitions to add $222 million to its NOI over the next three years. That would amount to 34% growth on its current annualized level of $662 million. On top of that, Rexford has ample financial flexibility to continue making accretive acquisitions as opportunities arise. Those growth drivers should enable the REIT to increase its dividend and shareholder value in the coming years.

Building back even better

W. P. Carey has lost more than 12% of its value this year. As a result, the diversified REIT's dividend currently yields more than 6%.

The REIT is in the middle of a transitional period. It made the strategic decision to exit the office sector last year, selling or spinning off its properties in that category. W. P. Carey also cut its dividend due to the impact of that lost income and a desire to retain additional cash to fund new investments. That ended a quarter-century streak of annual dividend increases.

W. P. Carey has started rebuilding its portfolio and its dividend this year. It invested nearly $1 billion in acquiring new properties during the first nine months of the year, primarily warehouses and industrial facilities. Meanwhile, it had over $500 million of additional deals in the pipeline. That has it on track to start growing its rental income again, which has already allowed it to raise its dividend. The REIT expects to continue expanding its portfolio in 2025 and beyond, which should support additional dividend increases in the future.

Shop the discount isle

Alexandria Real Estate Equities, Rexford Industrial Properties, and W. P. Carey have lost value this year due in part to the impact higher interest rates have on the REIT sector. On the bright side, they now offer even higher dividend yields, thanks to those lower stock prices. On top of that, this trio of REITs has clearly visible growth ahead. Meanwhile, the headwind of higher interest rates should fade as the Federal Reserve continues cutting them in the coming months. Those features make these REITs look like fantastic bargain stocks to buy this Black Friday.

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Matt DiLallo has positions in Rexford Industrial Realty and W.P. Carey. The Motley Fool has positions in and recommends Alexandria Real Estate Equities. The Motley Fool recommends Rexford Industrial Realty. The Motley Fool has a disclosure policy.