The real estate sector has been a lackluster performer in recent weeks, but some dividend-paying stocks in the group could be showing signs of promise, according to Wolfe Research. While the S & P 500 was up more than 6% in May, the real estate sector only advanced about 0.9% in that time. Real estate’s performance last month coincided with a volatile period for longer-dated Treasurys, including the 10-year note, as investors grappled with shakiness around tariff policy and deficit worries as the House of Representatives cleared a massive tax and spending bill . The 10-year Treasury is closely tied to the real estate sector, as a spike in yields raises borrowing costs and hurts returns on real estate investments. But even as the real estate sector has had a rough go, one corner of the market is standing out. “A more diluted group that intrigues us is Office [real estate investment trusts],” wrote Wolfe Research managing director and technical analyst Rob Ginsberg in a May 30 report. Indeed, the S & P 500’s office REIT sub-industry group was up more than 5% in May – its first winning month in 2025. “[T]he group is starting to come around nicely following months of aggressive underperformance,” Ginsberg added, noting that two names in particular are seeig “compelling setups.” COPT Defense Properties Ginsberg called out COPT Defense Properties , noting that once the stock punches through its 200-day moving average of $29, its November high at $34 will be “the only thing left in its path.” COPT Defense ended Tuesday’s trading at $27.56. Shares are off more than 11% in 2025, and pay a current dividend yield of 4.4%. COPT Defense, based in Maryland, has a tenant base that includes U.S. government agencies and defense contractors. It also owns and operates more than 30 data centers. Earlier this year, the REIT lifted its quarterly dividend by 3.4%, a move that caught the attention of Wedbush analyst Richard Anderson. “The company confidently raised the dividend as results are beating essentially every guidance building block,” he said in a May 12 report. Anderson rates COPT outperform. “Bigger picture, even though CDP appears protected from [Department of Government Efficiency] cuts and other military forced departures, we think the market [sees] the company as too close for comfort,” he added. “Assuming CDP continues to perform, we expect it to shake that stigma.” Wall Street also likes the name, with most analysts rating it a buy or strong buy, according to LSEG, and the consensus price target calling for 15% upside. Highwoods Properties Ginsberg also highlighted North Carolina-based Highwoods Properties , which owns and manages real estate in business districts in major Sunbelt cities, including Atlanta, Charlotte and Orlando. The key level for investors to watch is the $30.50 mark – Highwoods’ 200-day moving average, Ginsberg said. Once the stock tops that, it would open a “sizable runway to the high $30s,” he added. Shares ended Tuesday at $30.31. Highwoods’ stock is off about 1% in 2025, and it pays a dividend yield of 6.6%. “We see the set-up into FY26-27 as promising but still see some execution risk and remain Neutral,” Mizuho analyst Vikram Malhotra said in a report last week after meeting with Highwoods’ CFO Brendan Maiorana. Malhotra noted that the South is still benefiting from migration trends, which is lifting office demand in Highwoods’ markets. “Getting back to steady ‘mid-single-digit’ cash flow growth combined with a well-covered 7% dividend is the opportunity for investors,” the analyst added. Analysts largely rate the company a hold, and the consensus price target sees just 1% upside from current levels, according to LSEG. —CNBC’s Michael Bloom contributed reporting.
