[Editor’s note: “7 Inflation-Beating REITs to Ground Your Income Portfolio” was previously published in January 2020. It has since been updated to include the most relevant information available.]
It has certainly been a long bull market, but all good things must come to an end. Even as we see this ebb, don’t forget that income is an important part of your portfolio as well. It is a great asset when growth slows and as many income stocks have fallen to more approachable levels, taking a look at their long-term benefits is worth your time.
That’s why at Growth Investor we know it’s important to have some stocks that will deliver solid returns and deliver a good, inflation-beating (and sometimes inflation-trouncing) dividend as well. You can take the cash, reinvest it, or let it pile up to buy other investments.
Whatever you choose to do, it’s smart to have some income in your portfolio.
Below are seven high-yield real estate investment trusts (REITs) to ground your income portfolio. Low rates and strong lenders make this a great sector to start your income stock collection.
REITs to Buy: Store Capital (STOR)
Dividend Yield: 8.39%
Store Capital (NYSE:STOR) is actually an acronym for what the REIT specializes in — single-tenant operational real estate.
That means it focuses on maximizing the value of companies that run businesses like chain restaurants, health clubs, supermarkets, distribution facilities and retail.
Mind you, it doesn’t build or manage shopping malls. Just standalone stores.
It’s also a sale-leaseback structure, which means the companies sell the property to STOR and then lease it back so they can take advantage of the depreciation of the property.
The idea has worked so well that Warren Buffett invested $377 million in the company back in 2017. That’s nearly 10% of outstanding stock. STOR was brutalized in the most recent sell-off, though, and is now nearly a third of what it was trading this time last year.
First Industrial Realty Trust (FR)
Dividend Yield: 3.69%
First Industrial Realty Trust (NYSE:FR) focuses solely on industrial real estate, like warehouses and light industrial properties.
In the age of eCommerce, this is a very important sector. And with a $5 billion market capitalization, FR is a good-sized player.
As we have seen with Amazon (NASDAQ: AMZN) cutting ties with FedEx (NYSE:FDX), logistics is a very competitive industry at this point. And getting warehouses as close to customers’ homes as possible means better possibilities for next-day and even same-day delivery.
And that concept goes up the chain. Having products close to distribution centers is crucial. So, instead of stores popping up, it’s warehouses and distribution hubs. It’s the kind of business model that earns stocks a high grade in my stock-picking system.
The stock is down 20% from this time last year, but, again, almost all of that loss is panic-driven.
Dividend Yield: 3.66%
Prologis (NYSE:PLD) is the stock you want if you’re a true believer in the world of eCcommerce. It’s the largest industrial real estate company in the world.
It has facilities all around the world. And by its $56 billion market cap, you can be sure it’s a major player in this sector.
What’s more, now that the U.S. and China have sheathed their trade war swords for the moment, it allows the global economy some breathing space, not only on the retail level but also on the global business side as well.
While 2020 won’t be a massive year like 2019 was for U.S. stocks, the global market should recover nicely, and PLD will benefit from that.
The stock is down 30% year to date but only has given back less than 10% of its value from this time last year. The dividend still beats inflation and gives you some solid growth to boot.
Duke Realty (DRE)
Dividend Yield: 3.58%
Duke Realty (NYSE:DRE) has been around since 1972 and has about 155 million square feet of industrial rental space in 20 key logistical markets in the U.S.
It has warehouse properties in many of the major U.S. ports, which provides for solid, regular business. And because of its longevity, it has snapped up some of the best locations for its properties, giving it the ability to keep its properties busy, regardless of the economic cycles.
As I always say in Growth Investor, the United States is the oasis around the world, so many of the best investments are here. Plus, since it has properties all across the U.S., it can avoid any regional downturns. And to further insulate it from market cycles, it also owns and manages medical office properties, which is another key growth area.
It has a $13 billion market cap, so it’s big, but not massive. And it has been in the business for a long time, so it knows what it’s doing — and is doing it well.
The stock is off just a little more than 10% in the last 12 months, which makes it worth considering pre-rebound.
Armada Hoffler Properties (AHH)
Dividend Yield: 10.9%
Armada Hoffler Properties (NYSE:AHH) is a geographically focused REIT, with a variety of properties in the Mid-Atlantic region of the U.S.
Currently, it has over 50 properties, with 36 of them in Virginia. Remember, Virginia has two significant population centers. It surrounds Washington, DC — which includes the Pentagon as well as Amazon’s new HQ2 — and even more densely populated is the Tidewater area, where there is one of the biggest naval shipyards in the world as well as significant military bases.
Both these areas are booming. And AHH’s mix of properties — from multi-family housing to office buildings to student housing — allow it to take advantage of the growth in these states.
And since it’s focused and has been around for more than 40 years, it knows its region very well, which helps when it comes to selling properties and buying new ones.
The coronavirus knocked nearly 50% right off the top of this stock in only a matter of days, sending it too five-year lows.
Arbor Realty Trust (ABR)
Dividend Yield: 7.9%
Arbor Realty Trust (NYSE:ABR) has been one of my favorite REITs for a long time.
It’s not that big — about $1.6 billion in market cap — but it has a relatively new model that has been working well over the years.
It doesn’t own properties. It originates the financing on properties. And it focuses on some of the best sectors in the markets today — healthcare, senior housing, multi-family housing and other commercial properties.
By not taking ownership of the properties, its only risk is making sure the organizations it helps develop are reliable and the business looks sustainable.
Having been around since 2003, it means the company survived the 2008 real estate market implosion. That’s a good sign it knows what it’s doing moving forward.
The stock fell by two thirds in the recent panic and is sitting at lows it hasn’t seen since after the financial crisis. Between its growth and income prospects, ABR is a top candidate for my Money Magnets strategy.
PennyMac Mortgage Investment Trust (PMT)
Dividend Yield: 29.79%
PennyMac Mortgage Investment Trust (NYSE:PMT) is similar to ABR in the sense that it focuses on the origination of loans and not the ownership of property outright.
The difference is, PMT focuses on the residential market. It does mortgages and mortgage-related loans (like refinancing and home equity lines).
Admittedly, this is not a good time for the housing market, but this stock is one to watch, especially as pent-up spring demand is released in the summer with the likely end of the panic.
‘Money Magnets’: The Best Dividend Growth Stocks Around
Whatever your portfolio size and goals, you’ll also want to look at the group of stocks I’ve nicknamed the Money Magnets.
Not only did these stocks earn an “A” in my Portfolio Grader, thanks to strong buying pressure and great fundamentals …
The stocks also earn an “A” in my Dividend Grader. These stocks are able to pay great yields — and have the strong business model to back it up.
All in all, I’ve got 28 strong dividend growth stocks for you now in Growth Investor — averaging 4% yields — far more than the S&P 500 or even a Treasury bond. These stocks are poised to do well as we continue to see international capital flow to the U.S. markets. Click here to see how I found these stocks, and how you can get great performance out of YOUR portfolio — come what may.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.