Why I’m Doubling Down on This Beaten-Down 4.1%-Yielding Dividend Stock
Wall Street's latest casualty just became my newest conviction buy.
The Yield Play That Defies Conventional Wisdom
While traditional investors chase momentum, this 4.1% dividend payer sits battered and overlooked—exactly where opportunities hide. The market's short-term memory creates long-term advantages for those willing to swim against the current.
Numbers Don't Lie—But Analysts Sometimes Do
That juicy 4.1% yield isn't some speculative promise—it's cold, hard cash flowing to shareholders while the stock trades at distressed levels. Sometimes the best investments emerge from sectors everyone else has abandoned faster than a Wall Street banker dodging accountability.
Positioning for the Rebound
This isn't about catching falling knives—it's about recognizing when fear has overshot fundamentals. The same herd mentality that creates bubbles also creates bargains. And right now, this dividend stock screams opportunity for those with patience and perspective.
Resilient rental income
Invitation Homes is a leading owner and manager of single-family rental properties. It owns interests in nearly 93,000 homes and manages over 17,000 additional properties for other investors. It focuses on 16 Core housing markets, predominantly in the Sun Belt and on the West Coast, benefiting from those regions' above-average population and job growth.
Consistent demand for housing has allowed the company's rental property portfolio to generate resilient and steadily rising rental income. Its focus on high-demand properties (single-family homes) in strong housing markets has driven above-average same-store net operating income growth. Since its initial public offering in 2017, Invitation Homes has delivered more than 60% net operating income growth, nearly double the national average for multifamily properties during that period (36.7%).
Invitation Homes' portfolio maintains strong occupancy rates (over 97% this year). Meanwhile, it has raised its rents at a healthy rate (over 4% blended lease rate growth in the second quarter). This provides the REIT with durable cash FLOW to pay dividends. It will distribute around 72% of its adjusted funds from operations (FFO) this year as dividends, which is a conservative ratio. That provides it with a nice cushion, allowing it to retain cash to invest in new income-generating rental properties.
Multiple avenues to continue growing
Rent growth is only one of Invitation Homes' many growth drivers. The REIT also routinely buys houses (either outright or with joint-venture partners) to expand its rental property portfolio. It currently expects to spend around $750 million on acquiring properties this year. It purchases those properties on the open market, from other real estate investors, and directly from homebuilders. It has partnerships with several leading homebuilders to buy over 1,800 purpose-built rental properties over the next several quarters.
The company also has plenty of room to expand its third-party management business, which it launched last year. This platform enables it to leverage its in-house management capabilities to earn incremental income by providing those services to other investors. This platform could also provide the REIT with opportunities to acquire properties it manages when its clients are ready to sell.
A new growth avenue is Invitation Homes' developer lending program, which it launched this year. In its first deal, the REIT provided a builder with a $32.7 million loan to support the development of a 156-home community in Texas. The company has the option to acquire the community once it has stabilized. This platform can generate incremental interest income and new investment opportunities.
The REIT's growing portfolio and rental income should enable it to continue increasing its dividend. Invitation Homes has raised its payout every year since its initial public offering in 2017, including a 3.6% hike late last year.
A great value proposition
Shares of Invitation Homes have slumped over the past year despite the market's surge. A silver lining of that sell-off is that the REIT's dividend yield has risen above 4%. That's an appealing level for a company with an excellent growth track record. With more growth ahead, I couldn't resist the opportunity to scoop up more shares of this top-notch dividend stock while it's on sale.
