Beginner investors looking for an opportunity in 2024 should be looking at sectors as opposed to stocks these days. Over the last few years, we have been focusing too much on finding growth stocks while watching other sectors fall lower and lower. Thing is, now these sectors are the perfect place to look for undervalued stocks. Today, we’re going to focus on five Canadian stocks that would be the perfect place to start.
The year of the merger
Analysts believe that after a year of cost cutting, companies with strong balance sheets are going to be looking to merge or acquire other companies trading cheaply. Higher interest rates continue to put pressure on companies, and cost cutting will continue to be a part of the future as well. That can create a dire situation for companies swimming just above water.
So while privatizations may continue as well, there should also be “way more merger activity.” And that’s particularly true in the sector of real estate investment trusts (REIT). Though options may be limited.
Right now, however, analysts believe that investors are looking at the sector, without investing. And this is creating a huge opportunity for those looking for passive income as well as growth.
The best options
While there haven’t been any announcements when it comes to mergers or acquisitions in the near future, analysts believe investors should target some companies now while they remain a steal. So let’s get into some of those options.
Killam Apartment REIT (TSX:KMP.UN) should outperform in 2024, seeing shares potentially climb to $21.29, according to consensus estimates. This company focus on Canadian multi-family homes and changing rent control dynamics should allow the stock to see some strong organic growth in Ontario specifically. It offers incredible trading liquidity as well, creating solid opportunities for growth in the future. For now, it offers a strong dividend yield at 3.73%.
RioCan REIT (TSX:REI.UN) should be another strong performer, especially as consumers get back to retail spurred by lower interest rates in the next year. Management is optimistic about the future, especially if we avoid a recession. Therefore, there is a lot of opportunity to generate attractive returns on today’s value, with a dividend yield of 5.86%, and consensus target of $21.63.
Industrial properties continue to hold strong value as well, with Dream Industrial REIT (TSX:DIR.UN) a strong choice, especially if we see some merger activity. Earnings prospects are strong for the sector, with the stock providing incredible top-line performance. So right now could be the perfect time to get in on this passive income stock with a 5.15% dividend yield before it climbs to a consensus of $16 per share.
Diversification is another key part of investing, and there are two options to consider here. First is Allied Properties REIT (TSX:AP.UN), which should see more growth from its office fundamentals, with the space remaining oversold. It offers a diversified geography in urban markets across the country. Meanwhile, H&R REIT (TSX:HR.UN) is another great option, with earnings from both Canada and the United States coming in. Allied offers a yield at a whopping 8.75%, with HR REIT at 6% as of writing.
Sure, mergers may not happen in the near future. But these five passive income stocks still offer a huge opportunity for investors looking to see returns and dividends. And that should certainly come from these REITs offering oversold shares for a great deal.