The market has flipped from greed to extreme fear within a month, as investors flee for safety over AI bubble fears, labor market woes, and the ongoing government shutdown. The S&P 500 reached extreme historical valuation levels when compared to both 5-year and 10-year averages. Recent volatility indicates a market rotation could be underway. REITs offer a potential stable source of income for investors when markets are volatile. REITs are required by law to disburse high dividends and are backed by tangible, inflation-resistant assets.
Millrose Properties is paying out a substantial dividend yield of 8% following its spinoff from Lennar earlier this year. The REIT is trading at a small discount to its book value per share and is targeting a dividend payout ratio of 100% of AFFO. An investment-grade rating and a conservatively leveraged balance sheet reduce MRP's overall risk profile.
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Millrose Properties has delivered strong, predictable results post-spin, with recurring option fee income and faster-than-expected third-party deal growth. The company offers a nearly 10% dividend yield, paying out all net earnings, making it attractive for income-focused investors but limiting capital appreciation. Shares trade at 0.8x book value, which I view as fair given housing risks and limited ROE upside; my $28 price target remains unchanged.
For the first time in its (admittedly short) history as a publicly traded real estate investment trust (REIT), Millrose Properties (MRP -0.36%) has declared a dividend, and investors were quite happy about the news.