Real estate investment trusts (REITs) are companies that focus on property. By managing and leasing sites, income can be generated, making them attractive options for dividend investors. Ones that have been beaten down recently can be undervalued, with one high-yielding option catching my eye.

Why the stock is down

I’m talking about the Regional REIT (LSE:RGL). It focuses on regional office properties, mainly commercial buildings outside London’s M25. It owns and manages a portfolio of these and aims to generate income and capital growth from rents and asset value increases.

Over the past year, the stock ‘s fallen 12%, which is broadly in line with the portfolio’s net asset value (NAV) decline. In theory, these should correlate well with each other, although I note that the stock trades at a long-term discount to the NAV. This typically indicates weak sentiment towards the company, but in years to come it should reduce to be closer to the NAV.

The drop in the NAV reflects the decline in value in the commercial property market. However, I don’t see this as a big risk going forward. Several of my friends are slowly being forced back to working three or four days a week in the office. In a few years’ time, I think most traditional businesses will be back with staff in the office every day as standard. Based on this reasoning, I think the REIT’s long-term outlook’s positive.

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Juicy income

Historically, Regional REIT’s paid income out quarterly. From looking at the dividend per share over the past year, the rise in dividend yield has come partly from the payout increasing, as well as the stock falling.

Aside from the yield, the main thing I look at is the dividend cover. It’s currently 1, which means earnings per share can completely cover the dividend. This is a good sign, as the business isn’t paying shareholders more than it can actually afford. One risk is that if it falls below par, then it’ll start eating into retained earnings, which isn’t great.

Another factor I check for REIT dividends is rent collection. In the latest quarterly update, this stood at 97.7%. I want this to be as close to 100% as possible, so that the company can maximise the revenue potential.

The outlook from here

Back in November, the company said: “Leasing momentum has been negatively impacted by the uncertainty stemming from the broader economic environment and specifically by the inconsistent messaging from the UK Government regarding the forthcoming budget“.

This has now passed, and I don’t feel it was as bad as many expected. Of course, it’s a risk going forward, but I think the next report should detail more management certainty about the UK economy for 2026, helping the stock. Overall, I think it’s a good income share for investors to consider.