Real estate investment trusts (REITs) are types of companies that focus on owning property and distributing the rental income. As a result, this can make them popular with dividend investors. So when I spotted a REIT with a high yield and a low valuation, I decided to do some deeper research to see if it was worth buying.

A difficult year

I’m talking about the Regional REIT (LSE:RGL). To begin with, let’s talk through the 24% share price fall over the past year. The biggest issue is that the REIT remains heavily exposed to the UK regional offices market at a time when investors are demanding evidence that the post-pandemic recovery in this part of the property sector’s genuine.

Occupancy actually slipped to 75.9% by estimated rental value in 2025, versus 77.5% a year earlier, while net rental income dropped from £46m to £40.3m. The property portfolio also suffered a 5% like-for-like valuation decline during the year.

Earnings have also deteriorated significantly. Its European Public Real Estate Association (EPRA) earnings per share fell from 19.2p in 2024 to 11.8p last year. And management has already warned that 2026 earnings are likely to fall further as the impact of lease breaks feed through.

However, the 51% undervalued figure represents a different angle on the stock. Despite the share price falling, it appears it has dropped too far, too fast, in comparison to the net asset value (NAV) of the property portfolio.

In theory, the NAV should be roughly the same as the share price. Yet the latest NAV means the share price is trading at a 51% discount to this. That’s why there’s an argument that investor pessimism has been too harsh recently.

Addressing the dividend

The stock’s yield has partly been bumped up by the falling share price. However, some could look past this if the dividend per share was increasing. Unfortunately, it’s not.

Management paid 10p per share for the 2025 full year, comfortably covered by earnings per share of 11.8p. But management’s targeting 8p for 2026, while the latest dividend was reduced from 2.5p to 2p.

More importantly, the company wants the dividend covered by earnings rather than simply maintaining an eye-catching payout it can’t afford. Even at 8p, the dividend yield is still very high. So I think it was sensible to reduce it to ensure sustainability, even if some might be worried by a falling dividend payout.

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The bottom line

Based on the share price and falling dividend, the Regional REIT isn’t the super-star dividend stock I first thought that it could be. The risks around occupancy, property values and earnings are likely to hang like a cloud over the stock for some time.

Yet the discount to the NAV’s appealing. If management can move occupancy higher and prove dividends are fully covered by earnings, it could be a comeback story in the next couple of years.

On that basis, I’m considering investing a small amount in the REIT, and I think like-minded investors could do the same.

Should you invest £5,000 in Regional REIT right now?

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Jon Smith does not hold any positions in the companies mentioned