One thing is certain. In volatile markets, income is a great alternative. And real estate investment trusts (REITs) are delivering some of the best returns in the space. What’s more, that outperformance should continue for a long time to come, with the perfect blend of slow growth and low interest rates in the US.
Because these REITs are U.S.-focused, it also means that they’re not vulnerable to external forces for their further successes. I did some digging and found seven high-yield REITs that will pay you inflation-beating yields while they also grow their asset values. These are some of the top names in the business that are in the best sectors for growth well into the future.
These picks are also smart, conservative ways to play sectors like tech, healthcare and the bond markets. And they all get top ranks from my Portfolio Grader for timeliness, as well as strength.
High-Yield REITs That Will Pay You: Arbor (ABR)
Arbor Realty Trust Inc (NYSE:ABR) is a unique REIT in that it doesn’t own properties as much as it finances properties. Its specialty is multifamily and senior housing as well as healthcare and diverse commercial properties.
While it only has a $1 billion market cap, this is actually a great advantage for growth investors looking for a serious income kick. Because it’s relatively small, it’s leveraged to growth – and the REIT sector is growing fast.
For example, year to date, ABR stock is up nearly 30% and in the past 12 months it’s up over 40%. But the kicker is, it’s still trading at a P/E of 9.
If that isn’t enough for you, it’s delivering a whopping 8.2% dividend, even after all that growth.
Realty Income (O)
Realty Income Corp (NYSE:O) is one of the founding REITs in the market, established in 1969. Another unique aspect of this tried-and-true trust is the fact that it delivers its income monthly.
Usually, REITs and other dividend stocks pay out their dividends quarterly. If you’re an income investor, setting up a varied income stream from your holdings is a good way to keep income flowing regularly.
But beyond convenience, O is a rock-solid REIT that has some of the top names in the industry leasing its properties from coast to coast. That means its nearly 4% dividend is solid.
It also means, the O can build off its clients’ successes. O stock is up 33% in the past 12 months and is a good choice if you’re looking for a conservative consumer retail play.
Blackstone Group (BX)
Blackstone Group LP (NYSE:BX) isn’t technically a REIT. It’s an investment and fund management service that operates as a limited partnership.
The reason it’s in this list is because it’s an excellent firm that has significant investments in real estate around the world, as well as all the other investment services it provides.
What’s more, it also delivers a substantial – and reliable – 5.3% dividend.
BX is another firm that like the REITs, will benefit mightily from this Goldilocks economy. Up 35% year-to-date with a P/E of 16, there is still plenty of headroom and opportunity for BX to keep on running.
Digital Realty (DLR)
Digital Realty Trust Inc (NYSE:DLR) specializes in owning and managing properties for data centers as well as co-location services.
The latter is a space where data centers are available for rental to retail customers. For example, if you’re a smaller company that is ready to launch your product but you don’t want to spend a ton of money on a data center until you know how much capacity you need, you use a co-location service so you can right-size your build.
DLR is the leader in this fast-growing sector and has been on a tear for a while, since it’s also a way to play the cloud computing trend without having to invest directly in volatile cloud stocks.
As 5G ramps up in the U.S, there will be another wave of demand for data centers and server space since 5G is almost 1,000x faster than current 4G networks. That means more streaming as well as AI-driven systems and internet of things (IoT) communication (e.g., smart houses, driverless cars, etc).
Because of its promise and sector leadership, DLR stock is very popular, so its dividend sits around 3.7% and its growth in the past 12 months is around 11%. It’s a solid, steady way to play tech growth.
WP Carey (WPC)
WP Carey Inc (NYSE:WPC) is another REIT that has been around for a very long time, founded in 1973. Basically, it owns buildings and manages them for its clients. It also manages buildings for clients, as well as runs its own real estate investment business, including placements for other REITs.
What makes WPC unique is its ‘triple net lease’ model, where its clients pay for taxes, maintenance and insurance on the buildings the lease, in addition to rent and utilities. So, WPC just owns the buildings and manages the properties. That’s a pretty good deal and means WPC can run a much leaner operation since it isn’t dealing with all these other aspects.
And those improved margins get passed through to investors as its impressive 5.1% dividend. The stock is also up a solid 25% in the past year. This is a great choice if you’re looking for a conservative play in commercial real estate stronger corporate growth.
American Campus Communities (ACC)
American Campus Communities Inc (NYSE:ACC) is a REIT that specializes in owning, developing and managing on- and off-campus housing for college students.
Gone are the days of the rough-and-ready college dorms. Nowadays, the dorms are like nice apartments. Granted, for the money it costs to go to college these days, that may not be too surprising.
But the fact is, housing is a big part of the competitive process for colleges. If a student is choosing one school over another, many times, all other things being equal, housing could be the tipping point.
ACC currently has 206 communities on or around 96 campuses, with 83 on-campus developments. Plus, this model is a great feature for many schools that don’t want to take on the massive efforts and costs to develop and manage these projects themselves.
ACC is up 26% in the past year and is still delivering a solid 4% dividend.
Medical Properties Trust (MPW)
Medical Properties Trust Inc (NYSE:MPW) rounds off the group as the featured medical and healthcare facilities REIT.
Like WPC, MPW is a triple net lease company — the tenant pays taxes, maintenance and insurance on the property as well as rent and utilities — that also offers financing to its clients. It can provide 100% financing to companies looking to develop projects from $10 million to $1 billion. Most conventional lenders only offer 60-70% financing.
Given the fact that healthcare in the US is a significant long-term issue, especially as the population ages and baby boomers begin to retire in significant numbers, MPW is in the middle of a significant megatrend.
With scores of properties across the US, it also has expanded its business to Europe where it has facilities in the UK, Germany, Spain and Italy.
Up 40% in the past 12 months and still delivering a robust 5.5% dividend and a PE ratio of a mere 6.7, MPW is a compelling way to play the global healthcare trend in industrialized countries.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.