The market is rallying, and it's no longer just the largest growth stocks carrying the team. Smaller stocks are moving higher, and right now nearly two-thirds of U.S. exchange-listed stocks are in positive territory for 2024. Let's look at some of the names that aren't playing along.
Realty Income (NYSE: O) and Comcast (NASDAQ: CMCSA) are trading lower this year. They are some of the more promising candidates to join the rally in the final six months of the year.
1. Realty Income: Down 2% in 2024
This seems like an odd time for Realty Income to sit out a market rally. Interest rates are possibly heading lower in the coming months, and this is one of the many real estate investment trusts (REITs) that should benefit from the next new normal.
Realty Income is a well-diversified REIT with more than 15,000 commercial properties spanning 89 different industries. It's also one of the more recession-resilient players in this niche, as its largest sectors are all-weather supermarkets and convenience stores. The proof is in the hike pudding. Realty Income has boosted its dividend in 29 consecutive years.
Realty Income is built to be a steady producer for its shareholders. Its tenants enter into long-term triple net leases, so it's not Realty Income on the hook for volatile property insurance, real estate taxes, and operating expenses.
Image source: Getty Images.
The current yield of 5.6% may not be much more than you can collect safely in one of the top money market funds yielding just above 5%, but play this one out. With inflation coming under control and the economy showing signs of cooling the Fed is growing more likely to ease up on rates. Realty Income's 5.6% payout -- and nearly three decades of annual hikes -- is going to look even better as fixed income options start to retract.
The REIT -- one of just three to have delivered at least 25 years of increasing distributions -- might not be trading in the red for long. It's down just 2% in 2024 as of Tuesday's close. When interest rates start to tick lower, it's a fair bet that Realty Income will move higher as the class act of conservative commercial REITs.
2. Comcast: Down 10%
One name that has more ground to make up than Realty Income is Comcast. The media giant that dabbles in everything from its namesake cable TV and online connectivity to its NBC Universal empire of media networks and theme parks is trading 10% lower in 2024.
Media stocks in general have come under fire given the cutthroat nature of content streaming and monetization challenges. Comcast has its steady broadband and cable operations to generate a ton of cash so it can afford to take chances on being a major player in the digital future of entertainment.
Comcast is standing tall in a market with some shaky players. With a rival hoping to be acquired and most peers struggling to turn their premium streaming services profitable, Comcast is firmly in the black. The stock is trading for just 9 times this year's projected earnings. Comcast is also returning money to its shareholders in the form of a healthy dividend of 3.2%. It's less than half of Realty Income's yield, but any reasonable payout will stand out once fixed income rates start sliding.
The near-term outlook is strong for Comcast, even if you're not a fan of its fading cable TV business. Its studio already has two of this year's five highest grossing theatrical releases, and it will have another winner this weekend with Twisters. It's turning heads on the theme park front with the arrival next year of Epic Universe, the first major gated attraction to open in the U.S. since the turn of the millennium. It's entertainment, and everyone loves the story of a leader when it starts off as an underdog.
Should you invest $1,000 in Realty Income right now?
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Rick Munarriz has positions in Comcast and Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
