After one of the worst years for the stock-and-bond portfolio (both stocks and bonds took an uppercut to the chin), the current environment seems very ominous. While there may be a recession coming and great uncertainty regarding central bank policy, I still think valuations, especially in some of the higher-yielding corners of the market, are compelling.
Though it may not seem like it, the value proposition is better today than it was back in fourth and final quarter of 2021, when it only seemed that stocks could rise.
Indeed, many beginner investors found out the hard way that stocks do go down. And they can stay down for an extended period. Those rookie traders chasing quick gains got hurt the most. Though new investors also saw plenty of red through 2022, most will be sticking around for the ensuing recovery. Now, I have no idea when stocks will make new highs and see the light of day again.
Regardless, long-term investors who have years, if not decades, to invest should not fret over 2022. Instead, they should focus on the next five to 10 years. If you see a historically discounted firm, why not add to a position?
Passive-income stocks on the cheap
In the case of passive-income stocks, there tends to be more yield after brutal plunges. Provided you put in the homework to ensure a dividend (or distribution) is safe, I think there are few reasons not to act at this juncture.
Tech stocks have been bouncing back so far this year. They got hit hardest, so it’s natural that they ricochet by the most. Such a sharp bounce-back tends to lose upward momentum with time. They may even overextend, leaving them vulnerable to the market’s next correction. When it comes to value or low-beta plays with swollen yields, they haven’t bounced back nearly as sharply. I think these plays could be key to nabbing a bargain in what could be another rough year for markets.
In the real estate investment trust (REIT) space, there are many cheap plays that offer monthly income payments.
Who couldn’t use an income jolt at a time like this? With the price of everything going rocketing higher and higher, the following REITs are worth a very close look at these prices.
SmartCentres REIT (TSX:SRU.UN) and Boardwalk REIT (TSX:BEI.UN) are two intriguing opportunities in the REIT space that may be worth your careful consideration.
SmartCentres is a retail REIT that’s slowly, but surely becoming more of a retail-residential hybrid REIT. Of course, bets on residential properties won’t dilute the retail property exposure overnight. Regardless, I view Smart as a different breed of retail REIT.
It houses very high-quality tenants across attractive locations across the country. Indeed, strip malls are not sexy. But Smart has shown that it can get foot traffic moving through its locations. With a Walmart anchor at most stores, Smart is arguably one of the smartest REITs to own through a recession.
Smart isn’t immune to high rates and recession pressures. However, it can plow through a recession. With so much macro risk already baked in (shares down 20% from its two-year highs), with a 7% dividend yield, SmartCentres REIT looks too cheap to ignore for seekers of passive income.
Boardwalk REIT sports a mere 2.1% yield. That’s well lower than Smart. Still, you’ll likely get more in the way of capital appreciation over time. The stock plunged more than 31% from peak to trough last spring, only to post a nearly full recovery.
Though shares are within striking distance of new highs, I still think the well-run residential REIT could have room to run. It’s a residential property powerhouse that could benefit greatly as high interest rates push would-be homebuyers toward rentals.