In any type of market, investors love income. When economic uncertainty is high, knowing a dividend payment is coming through helps ease our worries. When the economy is booming, that extra dividend payout is a bonus. So how do we find these real estate investment trust (REIT) stocks to buy?
I like hunting down income-generating REIT stocks based on their consistency and quality. In many cases, these names may fly under the radar despite the higher yields and incredible consistency.
According to the U.S. Securities and Exchange Commission (SEC), “To qualify as a REIT, a company must have the bulk of its assets and income connected to real estate investment and must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends.”
During certain environments — mostly pertaining to the economy and interest rates — REIT holdings can struggle and we’re seeing that today. However, for many patient investors, it could be an opportunity to buy high-dividend REIT stocks for discounts.
REIT Stocks to Buy: Realty Income (O)
Realty Income (NYSE:O) has become known as the Monthly Dividend Company. Only decades of consistency could deliver that type of title. As shares continue to languish around $60, long-term investors seem content to DRIP (dividend reinvestment program) their dividend payouts into the stock, slowly building their stake as shares yield just over 5%.
That’s a rather high yield for this stock, which has only yielded more than 5% for brief periods of time over the last decade.
The company has now raised its dividend for 103 straight quarters — or four times a year for more than 25 years. How many companies struggle to raise their dividend just once a year over a span like that? Plenty!
Further, Realty Income has paid a dividend for 636 consecutive months (or more than 50 years).
Lastly, the firm believes in diversification from a tenant and industry perspective, helping to insulate its risk and remain committed to the dividend. When investing in REIT stocks for income, diversification is key.
The Longest Streak: Federal Realty (FRT)
Like Realty, it’s been tough to find Federal Realty (NYSE:FRT) with an elevated dividend yield over the last decade. However, despite a recent 15% rally in the stock price from the May low, shares still yield close to 4.5%.
For a blue-chip name like this, it should have investors looking at it as one of the REIT stocks to buy.
The company recently reported better-than-expected bottom-line results, while its portfolio had 94.2% of its properties leased as of quarter-end of March 31. That’s up 0.50% year over year. Further, CEO Donald Wood said, “Leasing volume has remained strong, exceeding pre-pandemic levels by 20%-30%.”
According to the company, “With an increased annual dividend rate for 55 consecutive years, we hold the longest consecutive record in the REIT industry.”
Despite a modest sub-$8 billion market cap, Federal Realty holds great properties in numerous markets.
Income Generating REIT Stocks: Public Storage (PSA)
Have you tried getting a storage unit lately? It seems impossibly difficult and it has been that way for years. As a result, it has us focused on Public Storage (NYSE:PSA). Shares currently yield 4.1% while the stock has been consolidating after a long pullback.
PSA stock fell 35% from its high but has been trading between $275 and $300 for months. If the stock can clear multi-quarter resistance around $315, it could have a lot of room for the upside.
Here’s the thing, though.
The stock paid a dividend of $2.00 a share for years. That’s not like what we were used to with the other companies above — Realty Income and Federal Realty.
In 2022, the firm did pay a big special dividend and earlier this year, management raised the payout by 50% to $3.00 a share. So there is a renewed focus on the dividend, but it should be pointed out that the streak is nowhere near some of the stalwarts in the REIT space.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
