Guess what? The Fed kicked the can again this past FOMC meeting. With the global economy stalling and economic data being less than ideal, the central bank has continued to keep interest rates at basically zero. “Lower for longer” continues to be the rallying cry for the Federal Reserve. For income seekers, that continues to be a problem.
Finding a high yield continues to be elusive. Bonds and other traditional income products just aren’t cutting it. But, you know what is? Real estate investment trusts (REITs).
The combination of their pass-through nature and robust cash flows continue to make REITs a prime destination for investors looking for a high yield. Investors can find yields averaging in the 3%-5% range. However, some REITs pay more. Much more.
For investors looking to juice their income potential, or for those who need that high yield to survive, these REITs can be a life-saver. And, with the Fed keeping things low — potentially for a long time — high-yielding REITs make an ideal portfolio position.
With that in mind, here are three high-yielding REITs to buy today.
High-Yielding REITs to Buy #1: Annaly Capital Management, Inc.
High Yield: 10.83%
For investors looking for high-yielding REITs, Annaly Capital Management, Inc. (NYSE:NLY) may be one of the best choices. Annaly currently pays an eye-popping 10.83%. It gets that high yield because NLY isn’t like normal REITs in that it doesn’t own physically properties. Annaly is what’s called a mortgage REIT (mREITs).
NLY and its high-yielding sisters either lend money to builders or property owners, or more commonly invest in mortgage-backed securities. These back residential or commercial mortgages and can be backed by various government agencies such as Ginnie Mae. Typically, mREITs will use leverage and borrow money to invest in mortgage bonds. The difference between their low borrowing costs and the yield on the securities is pure gravy for the REITs. That translates into high yields.
There’s a lot of moving parts when it comes to investing in mREITs, which is why a proven winner like NLY is a great starting play in the sector. The firm’s management has continued to make the right moves in a variety of interest rate environments. That included snagging up rival Hatteras Financial Corp. (NYSE:HTS) in order to expand its commercial efforts.
These sort of forward-thinking and smart moves have continued to supply NLY with robust cash flows and the ability to pay that high dividend.
High Yielding REITs to Buy #2: WP Glimcher Inc
High Yield: 7.86%
Thanks to Amazon.com, Inc. (NASDAQ:AMZN) and other online shopping sites, Americans aren’t going to the mall as often as they once were. For class-B mall operators like WP Glimcher Inc (NYSE:WPG), the drop in foot traffic has been a major problem. But, for investors looking for a high yield, it could be an opportunity.
From a 2015 merger between Washington Prime Group and Glimcher Realty Trust, WPG owns roughly 120 different shopping malls across the country. The pairing allowed the two smaller REITs to realize some cost savings and other synergies needed for the pair to survive.
Additionally, WPG has started to “right-size” its portfolio and focus on more profitable malls. That includes having plans to hand over five of its malls to lenders and, essentially, walk away from the problems at these malls. WPG has also begun refinancing options at a few key locations. The addition of more lifestyle retail locations is also helping.
It’s still a risky bet, but WPG seems to be working. The firm’s FFO coverage of its dividend still affords it that lucrative dividend. And, it has seen sales per square foot rise at its malls overall. Eliminating the problem children will help on that front.
All in all, WPG is a high-yielding REIT that could be worth the gamble.
High Yielding REITs to Buy #3: Omega Healthcare Investors Inc
High Yield: 6.95%
Investors looking for higher-than-average dividend yields may want to consider REITs that specialize in a niche area. Omega Healthcare Investors Inc (NYSE:OHI) is one such specialized REIT.
As its name implies, OHI focuses its attention on healthcare-related real estate. Demand for healthcare continues to rise, and as that demand has expanded so has the number of facilities needed to conduct that medical business. That’s were OHI comes in.
Omega provides capital to property owners in order to build their facilities. However, many of OHI’s loans have been in the sale-lease-back style, meaning after a period of time, OHI will buy the building back and the tenant will continue lease the property from Omega.
The added bonus is that OHI has specialized even further by only focusing on skilled nursing facilities and assisted living facilities. Today, the REIT owns 932 skilled nursing facilities in the United States and the United Kingdom. The vast bulk of its rents come from the U.S. government by way of Medicare and Medicaid. While the government won’t pay much, it always pays on time.
That steady nature has allowed OHI to continue with its dividend growth, fund future expansions and provided investors with a high yield of nearly 7%.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.