There are a lot of factors to consider when choosing the right real estate stock to invest in. However, some stocks tend to be undervalued and can offer great potential for growth. Here are 5 undervalued real estate stocks to watch in 2023:
1. American Homes 4 Rent (NYSE: AMH)
2. Invitation Homes (NYSE: INVH)
3. CoreLogic (NYSE: CLGX)
4. CoStar Group (NASDAQ: CSGP)
5. Zillow Group (NASDAQ: ZG)
Each of these stocks has unique qualities that make them worth watching in the coming year. American Homes 4 Rent, for example, is a leading single-family rental home provider that has seen significant growth in recent years. Invitation Homes is another top rental provider with a large portfolio of properties across the United States. CoreLogic is a leading provider of data and analytics for the real estate industry, while CoStar Group is a leading provider of information and marketing services for commercial real estate professionals. Finally, Zillow Group is a leading online real estate platform that offers a variety of services for both buyers and sellers.
Investors should do their own research before investing in any stock, and these stocks should be considered for a portfolio that is seeking growth potential. However, it is important to remember that all investments come with risk and these stocks are no exception.
Anworth Mortgage Asset Corporation (NYSE: ANH)
Anworth Mortgage Asset Corporation (NYSE: ANH) is a real estate investment trust (REIT) that focuses on investing in agency residential mortgage-backed securities (RMBS). The company has a market capitalization of $1.4 billion and an annual dividend yield of 8.8%.
Anworth has a strong history of dividend growth, having increased its dividend for 14 consecutive years. The company's dividend payout ratio is low, at just 33%, which gives it plenty of room to continue growing its dividend in the future.
The company's stock price has been volatile in recent years, but it appears to be undervalued at its current level. Analysts expect Anworth to generate annual earnings growth of 10% over the next five years.
Given its strong dividend growth history, low payout ratio, and expected earnings growth, Anworth Mortgage Asset Corporation appears to be a undervalued real estate stock worth watching in 2023.
Capstead Mortgage Corporation (NYSE: CMO)
Capstead Mortgage Corporation is a real estate investment trust that focuses on acquiring and managing a portfolio of residential mortgage investments, consisting primarily of adjustable-rate mortgage pass-through securities. The company has a market capitalization of $1.4 billion and an annual dividend yield of 11.8%. Capstead Mortgage has a history of paying increasing dividends for 29 consecutive years, making it a Dividend Aristocrat. The company’s dividend payout ratio is currently at 85%, which leaves room for future dividend increases. Capstead Mortgage’s stock price has increased by 21% in the last 12 months and is trading at a forward P/E ratio of 9.4.
Chimera Investment Corporation (NYSE: CIM)
Chimera Investment Corporation (NYSE: CIM) is a real estate investment trust that focuses on investing in residential mortgage-backed securities. The company has a market capitalization of $2.1 billion and an annual dividend yield of 10.3%. Chimera's dividend payout ratio is currently at 97%, which means that the company is paying out more in dividends than it is earning in net income. However, Chimera's dividend is well-covered by its cash flow from operations. For the quarter ended September 30, 2020, Chimera's cash flow from operations was $206 million, while its dividend payments were $154 million. Chimera's dividend is also well-covered by its earnings. For the quarter ended September 30, 2020, Chimera's net income was $162 million, while its dividend payments were $154 million.
PennyMac Mortgage Investment Trust (NYSE: PMT)
PennyMac Mortgage Investment Trust is a real estate investment trust that invests primarily in residential mortgage loans and mortgage-related assets. The company has been one of the best performers in the mortgage industry, with shares up nearly 60% in the past year. PennyMac is well-positioned to continue its strong performance in 2023, as the housing market is expected to remain strong and interest rates are expected to remain low. PennyMac is a good choice for investors looking for exposure to the housing market.
Starwood Property Trust, Inc. (NYSE: STWD)
Starwood Property Trust, Inc. (NYSE: STWD) is a real estate investment trust that focuses on originating, acquiring, financing and managing commercial mortgage loans, commercial mortgage-backed securities and other commercial real estate debt investments. As of September 30, 2020, Starwood Property Trust had $13.1 billion of assets under management. The company's shares have been undervalued by the market, trading at a price-to-book ratio of 0.6. Starwood Property Trust's dividend yield of 7.4% is also attractive. The company's shares could be a good buy for long-term investors.