2 High-Dividend Stocks That Are Still Dirt Cheap

It is getting difficult to find attractive places to invest. As I write this, the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all trade within a few percentage points of their all-time highs, and to put it mildly, the valuations of some of the most popular stocks in the market look a little frothy.

However, one area where there are still bargains for long-term investors is the real estate sector. Not only can you find above-average, reliable dividends, but there are stocks with massive growth opportunities that have the potential to deliver market-beating returns over time. Here are two in particular that you may want to take a closer look at.

1. A tremendous opportunity as rates fall

EPR Properties (EPR -1.27%) isn't exactly a household name, but it owns real estate occupied by many businesses you're likely familiar with. The company is a real estate investment trust, or REIT, that invests in experiential properties. It owns movie theaters, ski resorts, eat-and-play businesses, waterparks, and many other types of property.

While there are admittedly some unanswered questions when it comes to the future of the movie theater business, box office revenue has been surprisingly strong. The current property portfolio is performing strong, and even in a difficult environment for growth, EPR is finding ways to invest.

However, the best could be yet to come. As interest rates (hopefully) fall over the next few years, it should become a far better environment to expand. Management sees a $100 billion investable universe of properties in categories EPR could pursue, and this is a market that is likely to get even larger over time.

EPR has an attractive 6.1% dividend yield and is a rare stock that pays monthly. It currently trades for about 11.2 times its 2025 funds from operations (FFO) guidance, and as rates fall and EPR is better positioned to take advantage of opportunities, this could end up being an extremely cheap entry point. (Note: FFO can be considered as the real estate equivalent of earnings.)

2. A great business that's cheaper than it looks

If you aren't familiar with Prologis (PLD 0.81%), it is one of the largest real estate owners in the world, with 1.3 billion square feet of rentable logistics space. Its properties include distribution centers, warehouses, and other property that is involved in moving products around the world. Tenants include some of the largest companies, such as Amazon (NASDAQ: AMZN), Walmart (NYSE: WMT), FedEx (NYSE: FDX), and Home Depot (NYSE: HD), just to name a few.

There are some major tailwinds that should keep demand for logistics real estate strong for years to come. For example, the e-commerce market has roughly quadrupled in size since 2012 and is forecast to more than double from its current size by 2030, creating a need for even more distribution and warehousing space. In fact, e-commerce retail needs roughly three times the logistics space as a brick-and-mortar retailer to handle the same sales volume. There's also a trend toward developing properties further from city centers and closer to where the customers are.

Prologis trades for about 19.6 times funds from operations at the current price, but this doesn't tell the full story. There is a lot of embedded revenue growth that isn't showing up in the numbers. In a nutshell, logistics real estate rental rates soared during the earlier days of the pandemic, but most tenants are on long-term leases, so many pre-pandemic leases are still resetting to the market rate. In fact, in the most recent quarter, Prologis' rent on new and renewal leases increased by 35% compared to what the prior tenants were paying.

Buy for the long term

I own both of these stocks, but not because I think they're going higher in the coming weeks or months. I have absolutely no idea what they'll do over short periods, but with interest rates trending lower and lots of demand for both companies' property types, I'm confident that those who buy now will be glad they did, several years from now.