3 Elite Dividend Stocks Down 30%+ to Buy Right Now for Decades of Passive Income

Stock market sell-offs can be great opportunities to pad your passive income. That’s because dividend yields have an inverse relationship with stock prices. So, with stock prices down and yields up, new investments can generate more passive income.

Shares of leading real estate investment trusts (REITs) Crown Castle (CCI), Digital Realty Trust (DLR), and Prologis (PLD) are all down more than 30% from their peaks over the past year. Because of that, investors can lock in much higher yields from these elite dividend stocks. That should set them up to collect steadily rising passive income for decades to come.

A reacceleration is coming
Crown Castle’s stock has tumbled 35% from its 52-week high. That sell-off has driven the communications infrastructure REIT’s dividend yield up to 4.9%.

The company is battling several growth-related headwinds, which are weighing on shares. Higher interest rates and some customer-related issues will cause growth to slow this year. The company expects its adjusted funds from operations (FFO) to rise by 3% per share this year, a noticeable deceleration from the 6% growth it produced last year.

However, those headwinds should fade. The telecom industry is still in the early phases of deploying its next-generation 5G networks. That tailwind should drive demand for more communication infrastructure in the future.

Crown Castle sees a decade-long investment cycle ahead. That drives the company’s view that it can grow its dividend at a 7% to 8% annual rate over the long term. It would continue the company’s elite track record of increasing its dividend. Crown Castle has expanded its payout at a 9% compound annual rate since 2016.

The headwinds should fade
Digital Realty is facing many of the same headwinds as Crown Castle. That’s putting weight on its stock price, which has tumbled more than 30% from its 52-week high. The sell-off has pushed the data center REIT’s dividend yield up to 4.6%.

Digital Realty’s headwinds could cause its 2023 adjusted FFO to remain flat with last year’s level. However, the REIT expects strong demand for data center solutions to drive a reacceleration in the future. It’s just starting to use its pricing power to push rates higher at its existing properties. Meanwhile, the company has a large pipeline of data center development projects. These catalysts should help drive adjusted FFO growth in the future.

That potential future growth suggests Digital Realty should be able to continue growing its dividend. The company has an elite track record. It has increased its payment every year since its public market listing in 2004. That puts it in a select group of REITs that have grown their dividend each year since becoming public.

Enormous embedded growth
Shares of Prologis have fallen about 30% from their 52-week high. That sell-off has propelled the industrial REIT’s dividend yield to 2.9%.

The primary issue weighing down Prologis stock is an expected slowdown in industrial real estate demand. However, even if that happens, it will have little impact on Prologis’ growth. It has yet to capture the full benefit of surging rents in recent years because of the long-term nature of its existing leases.

There’s a more than 60% gap between market rates and rents on the company’s existing leases. Because of that, the company estimates that the net operating income of its legacy portfolio will grow by 8% to 10% per year. That assumes no further rent growth, which seems unlikely. Prologis expects rents will rise by 9% globally this year, even with its forecast for a moderate recession.

The company also expects to benefit from completing development projects and acquisitions. These drivers should enable Prologis to continue growing its dividend. Over the last five years, it has grown its dividend at a 12% compound annual rate. That’s double the REIT sector’s 6% average and even faster than the S&P 500’s 5% compound annual growth rate.

Exceptional income stocks to buy for the long haul
Crown Castle, Digital Realty, and Prologis focus on owning properties benefiting from long-term demand drivers. While those sectors face some near-term headwinds, the long-term outlook is much brighter — so they should be able to continue growing their dividends for years to come. Meanwhile, with their share prices down sharply and dividend yields much higher, they look like great income stocks to buy for the long haul right now.

— Matthew DiLallo

Where to Invest $99 [sponsor]
Motley Fool Stock Advisor's average stock pick is up over 350%*, beating the market by an incredible 4-1 margin. Here’s what you get if you join up with us today: Two new stock recommendations each month. A short list of Best Buys Now. Stocks we feel present the most timely buying opportunity, so you know what to focus on today. There's so much more, including a membership-fee-back guarantee. New members can join today for only $99/year.

Source: The Motley Fool