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If you’re looking for high-dividend stocks, the real estate sector, specifically real estate investment trusts (REITs), is the best place to find them.
REITs tend to have higher dividend yields because they are required by law to pay out at least 90% of their profits as dividends.
With stock prices in the sector falling as interest rates soar, now seems like a great time for dividend investors to capitalize on REIT opportunities. But the Federal Reserve predicts that interest rates should start falling later this year, which should encourage investors to return to dividend-paying stocks like REITs and push stock prices higher.
In the REIT sector, investors have many options, including office, residential, industrial, retail, and healthcare, each with different benefits. His REIT stocks have high yields that are different from other sectors. out front media (NYSE:OUT)one of the largest owners of outdoor advertising facilities, including digital and traditional billboards.
The company’s dividend currently yields 7.6%, and the stock has soared in recent months, nearly doubling from its October lows.
Outfront will also benefit from the industry’s secret weapon, but first, let’s take a look at why the stock is a good bet to keep rising from here.
periodic tailwind
Like other REITs, Outfront has benefited from expectations of lower interest rates since October, when the stock market began to rise.
In addition to benefiting from lower interest rates, Outfront is also benefiting from a recovery in the highly cyclical advertising market. Advertisers had scaled back ad spending in 2022 and 2023 in preparation for a recession that never came, but now consumer spending is strong and advertising demand is recovering. be.
Outfront’s fourth-quarter growth was modest, with revenue up just 1.3% due to headwinds in its transportation sector. However, management noted that demand in the signage segment is strong, which should translate into higher rates and expand profit margins.
In 2024, the company expects adjusted funds from operations to increase by high single digits from the $271 million reported in 2023.
But the real reason the stock could soar is the rise of new digital businesses as the outdoor advertising industry pivots to digital billboards.
Outfront’s $23 billion opportunity
While Outfront’s digital revenue increased 8.9% to $179.5 million in the quarter and accounted for 35.8% of total revenue, the digital out-of-home (DOOH) advertising opportunity is much larger and growing faster.
According to some estimates, the DOOH market will be worth $23.2 billion in 2022 and is expected to grow 11.2% annually until 2029, reaching a market size of $48.9 billion.
Outfront seems uniquely positioned to take advantage of that opportunity, especially as features like programmatic advertising add value to DOOH properties and drive up ad rates.
On Tuesday, for example, the company announced a major expansion of programmatic advertising in New York City’s transit system. Outfront installs digitally programmable signs in nearly every subway station (3,800 locations in total), and the platform allows advertisers to run ads and customize them based on variables such as time of day and location. You can change the sign by Outfront also partners with: trade desk, fresh petand the N.B.A.
If Outfront can capitalize on double-digit growth in the DOOH market while benefiting from lower interest rates and a broader advertising market recovery, its stock is poised to be a winner in the coming years. Investors who buy this stock now can also take advantage of an attractive dividend yield of 7.6%.
Should you invest $1,000 in Outfront Media now?
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Jeremy Bowman has a position at The Trade Desk. The Motley Fool has positions in and recommends Freshpet and The Trade Desk. The Motley Fool recommends his Outfront Media. The Motley Fool has a disclosure policy.
This $23 Billion Secret Weapon of Dividend Stocks was originally published by The Motley Fool.
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