Real Estate Investment Trusts (REITs) own, operate, and finance real estate properties such as healthcare facilities, apartment complexes, hotels, and offices. One of the most important factors to consider when assessing REITs is their dividend ratio. You may have looked at various REIT stocks and wondered why are their dividend payouts so high. It is because every company that files as a REIT is legally required to distribute 90% of its taxable income to shareholders through dividend payments.
There are typically two types of REITs. There’s the Equity REIT, which focuses on owning real estate properties. And the other is a mortgage REIT, which owns real estate mortgages.
REITs provide investors with exposure to real estate in a much more accessible way than outright owing properties. Notably, these trusts also come with excellent dividend payout ratios, usually in the range of 35%-60%.
With that said, let’s look at three of the best options to buy right now.
| VICI | VICI Properties | $30.53 |
| RITM | Rithm Capital | $8.17 |
| AIV | Apartments Investment & Management | $8.07 |
VICI Properties (VICI)
VICI Properties (NYSE:VICI) is a REIT with an extensive portfolio of properties located in Las Vegas under names such as Caesars Palace, MGM Grand, and Venetian Resorts. Notably, the trust owns nearly 50 properties throughout the U.S. and Canada.
On May 17, the company entered an agreement with Century Casino (NASDAQ:CNTY) for four properties in Alberta, Canada. This deal was able to be completed for approximately $165 million.
At the beginning of May, the company reported its first quarter earnings, with net income and revenue more than doubling compared to Q1 2022.
VICI Properties’ recent acquisitions speaks to this REIT’s ability to grow. Over time, investors looking for exposure to the Las Vegas Strip ought to consider this top option.
Rithm Capital (RITM)
Rithm Capital (NYSE:RITM) is a mortgage servicing rights (MSRs) company. Mortgage servicing rights are obtained when the original mortgage lender for a real estate property sells the mortgage to another financial institution, such as with Rithm. Accordingly, a company like Rithm will then handle all of the administrative duties, such as processing payments for a fee provided by the original lender.
On May 4, the company released its first quarter earnings, reporting earnings per share of $0.14 per share and revenue growth of 3%.
One of the significant advantages of MSRs is that they become more profitable in the interest rate environment we are in at the moment due to longer mortgage length. With higher interest rates, mortgage holders are less-likely to prepay their mortgage. That makes certain mortgages less risky, when considering early prepayment risk.
Apartments Investment & Management (AIV)
Apartment Investment & Management (NYSE:AIV) is a REIT primarily focused on owning and operating multifamily properties located throughout the U.S. Over the last year, AIV stock has risen by 33%, which vastly outperforms most other REITs. That’s because this high interest rate environment has resulted in a general slowdown of activity in this sector.
Interestingly, in 2022, the company saw a 46% increase in revenue and impressive earnings per share of $0.49 per share. Those results were the key catalyst for this REIT’s outperformance, clearly.
The company has repurchased 2 million shares so far in 2023. This comes as the trust saw construction completion on nearly $700 million worth of real estate properties during 2022, with apartment home rental prices growing drastically since the pandemic. This company has seen profit growth, and will likely continue to, for the long-term.
On the date of publication, Noah Bolton held a long position in RITM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
