Real estate investment trust or REIT stocks are popular with many income-oriented investors. Why shouldn’t they be? These stocks tend to have higher-than-average yields, and it’s a play on the real estate market, which is known for its cash flow. It almost always has certain investors looking for the best REITs for income.
Interestingly, there can be broad exposure and niche exposure (like apartments, storage facilities, and data centers). Like everything, there are high-risk REITs to avoid and low-risk REITs that have low yields. The trick is to find a balance between both.
Of course, REITs do not have an easy go of it right now. Higher interest rates have made borrowing more expensive, while pressure in commercial real estate has many investors fearing a “black swan” event — and rightfully so.
This space will likely have to navigate some potentially volatile situations. However, for long-term investors focused on REITs with consistent dividends that plan to use a dividend reinvestment plan (or DRIP), this volatility can be used to their advantage.
Monthly Dividend REITs: Realty Income (O)
If you want monthly income, Realty Income (NYSE:O) is your play. Known quite literally as The Monthly Dividend Company, it has created quite a track record of consistency. Although the dividend increases have been small lately, the firm has raised its dividend for 102 consecutive quarters.
Yes, that’s right — quarters! So four times a year for more than 25 years now, Realty Income investors have gotten a raise. Imagine getting that kind of bump in your regular income.
Further, the firm has paid a monthly dividend for 634 consecutive months or more than 52 years. The level of consistency here is really impressive. So when looking for REITs that pay monthly dividends, this one has to be on the list.
When investors look at the firm’s portfolio, they’ll notice how strongly diversified it is. No more than 10.2% is allocated to any one industry, with a majority below 6%. On an individual company basis, no client makes up more than 4% of the firm’s business.
They say investors should diversify their income streams when buying dividend stocks. Well, diversification is something that Realty Income clearly specializes in.
Federal Realty (FRT)
When looking for the best REITs for income, Federal Realty (NYSE:FRT) is another name investors should consider.
Federal Realty owns premium properties in great locations. According to the firm, “We own, operate and develop award-winning retail environments and mixed-use neighborhoods in the nation’s most desirable markets.”
Further, “Our properties are located in eight major markets characterized by their superior demographics, high barriers to entry, and significant demand.”
These are the types of things you want to see when looking for the best REIT stocks. However, when one is looking for high-yield REITs to buy now, Federal Realty is not normally on the list.
Even now, it yields “just” 4.7%. That’s not bad for a normal dividend yield, but there are plenty of REITs that pay notably higher than that. However, Federal Realty has rarely yielded more than 4% over the past decade. In fact, above 3% was tough to find for a while! So I would consider the current opportunity to be a “high-yield” situation when looking specifically at Federal Realty.
Further, Federal Realty has not only paid but has raised its annual dividend for 55 consecutive years, holding “the single longest annual dividend growth record among all REITs.”
Public Storage (PSA)
It’s hard not to like Public Storage (NYSE:PSA) at some point. Some investors can decide that the stock is too expensive right now and wait for lower prices. Others may decide that the storage unit business is too good to ignore and begin accumulating shares in the near future.
Either way, Public Storage is one of the best in the business. From the firm:
“Public Storage is the world’s largest owner, operator and developer of self-storage facilities. Our more than 2,900 facilities across the United States serve nearly two million customers.”
The company has amassed a startlingly large market capitalization of more than $52 billion. That makes it bigger than Realty Income and Federal Realty — combined! Public Storage currently pays a dividend yield of about 4%. On the downside, it doesn’t have the same consistency as the companies above.
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.