Investing in real estate investment trusts (REITs) is a popular strategy for generating income through dividends. REIT dividend stocks offer investors the opportunity to benefit from the steady income produced by various real estate sectors. The stocks I will be covering represent the industrial warehouses and cell tower sectors, and offer the chance of high dividend growth.

Understanding the differences in REITs is essential for investors aiming to maximize their returns. Some REITs excel at leasing small industrial properties in densely populated areas, while others focus on larger properties. The performance of these REITs can be influenced by factors including market conditions and specific industry trends.

As I dive into the current state of a few REITs, I will examine their guidance adjustments and share my thoughts. You will learn how to evaluate a company and what metrics to use. This will help investors better understand the opportunities and challenges in the REIT sector, enabling them to make more informed investment decisions and see some dividend growth.

SBA Communities (SBAC)

SBA Communities (NASDAQ:SBAC) is a tower REIT, and its ability to grow Adjusted Funds From Operations (AFFO) per share primarily depends on its capacity to lease cell tower space. SBAC has operations in the United States and internationally, though the substantial majority of its Net Operating Income (NOI) comes from the United States. Cell tower REITs benefit from colocation. Colocation is the process of leasing space to multiple tenants on the same tower. Because additional tenants pay a similar rate but create minimal operating expenses, the net operating income from a tower increases substantially with additional tenants.

SBAC has an exceptionally low payout ratio. The annualized dividend rate of $3.92 only represents 29.5% of management’s 2024 AFFO guidance of $13.09 – $13.46. SBAC has a low dividend yield today, but is positioned to grow its dividend substantially.

The tower REIT sector faced headwinds over the last few years as tenants became cautious about investing in its networks and higher interest rates created a headwind for AFFO per share. For readers who are interested, I dove into the sector headwinds in an article late last year.

SBAC has a history of raising dividends. In 2019, the quarterly dividend was $0.37. As of today, the quarterly dividend has risen all the way up to $0.98.

Rexford Industrial Realty (REXR)

Rexford Industrial Realty (NYSE:REXR) is an industrial REIT focused on smaller industrial real estate within Southern California. Many of its properties are under 100k square feet. The smaller properties are considered “infill” developments. These infill properties are closer to residents and to other businesses than typical industrial warehouses.

In the latest earnings release, REXR reiterated most of its guidance. The only two exceptions were:

• The guidance for net income attributable to common stockholders per diluted share increased from $1.17 – $1.20 to $1.19 – $1.21 for 2024.
• The guidance for the company share of core FFO per diluted share increased from $2.31 – $2.34 to $2.32 – $2.34.

These should be considered very tiny changes. Overall, this was a respectable quarter for REXR.

As mentioned in the earnings release, the company completed three acquisitions for $169.5 million during Q2. Year to date, the company has completed $1.3 billion in total investments. The majority of that was in a $1 billion deal with Blackstone. REXR currently has $160 million of new property acquisitions in the pipeline. There is still some due diligence that needs to be done before closing. REXR stated that there is no guarantee the company will close on these transactions.

REXR has been raising its dividend each year since the IPO. In 2014 the quarterly dividend was only $.12, but now it is $.42. I believe REXR is poised to continue. Despite a high payout ratio, REXR is able to generate strong dividend growth in Core FFO per share.

Prologis (PLD)

Prologis (NYSE:PLD) is the largest industrial REIT in the world. PLD runs a global portfolio. Most of its properties are large coastal properties. PLD’s earnings calls often provide a great deal of information about the macroeconomic environment for industrial real estate. Investors interested in any type of industrial real estate may benefit from listening to PLD’s calls, which are always available live on the company website.

The global industrial real estate market has seen some pressure from elevated levels of new supply reaching the market. Many of these projects started in 2021 or 2022. This was when lower interest rates were encouraging development. Management projects that new supply will peak soon and the situation will become more favorable. Despite the pressure from new supply, many of the expiring leases are dramatically below market. Consequently, PLD achieved outstanding spreads on its leasing efforts as indicated in the Q2 2024 earnings release. The net effective rent change was 73.9% and the cash rent change was 51.4%.

PLD has been raising its dividend for a decade. I posted my full REXR and PLD Q2 2024 earnings update just days ago. If you are looking for dividend growth, this is a sure bet.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

On the date of publication, Michael VanLoon is LONG PLD, SBAC, and REXR. The opinions expressed in this article are those of the writer, not subject to the InvestorPlace.com Publishing Guidelines.