A great way to start with REITs.
Real estate investment trusts, or REITs, are popular investments. They are a special class of publicly traded company that must deliver 90 percent of taxable income back to shareholders, creating a mandate for big dividends. There is a wide variety in this asset class. Some real estate companies own commercial properties like malls, others own industrial parks and still others own high-tech communications hubs. The dividends can vary greatly, depending on the profitability and revenue streams from these pieces of real estate. If you’re interested in REITs for income but don’t know where to start, here are nine with different reasons for investors to take notice.
Spirit Realty Capital (ticker: SRC)
Spirit is a “net lease” REIT that provides retail and office space to tenants, but only has to worry about the rent payments. That means a much more stable cash flow as property obligations such as taxes, insurance and even repairs are often pushed onto the lessor. With a portfolio of nearly 2,500 properties spanning more than 400 individual tenants that include cinemas run by AMC Entertainment Holdings (AMC) or pharmacies owned by Walgreens Boots Alliance (WBA), this is as solid an income play as you’ll be able to find in the REIT space.
Current yield: 8.7 percent
Simon Property Group (SPG)
Mall operator Simon obviously doesn’t have that much growth ahead, now that e-commerce is increasing and opening new retail locations is harder. But SPG has a portfolio of some of the most attractive properties across the U.S. including high-trafficked outlet malls, as well as upscale, open-air town centers in high net-worth areas. Simon has been a hit with investors in 2018, outperforming the S&P 500 since Jan. 1. The real power of this REIT comes from its big yield and eight years of massive dividend hikes that have sent payouts soaring from 60 cents a quarter in 2010 to $1.95 at present.
Current yield: 4.5 percent
American Tower Corp. (AMT)
One of the most reliable businesses these days is wireless communication. Smartphone users may not be aware that many times, connectivity isn’t being provided by a cell tower owned by their wireless carrier but bounced off an antenna rented from a third party. This is the business of American Tower. It owns more than 160,000 communication hubs around the world. While AMT’s yield isn’t as big as some on this list, its shares have doubled in the last five years compared to 65 percent gains or so for the S&P 500 index in the same period. That shows a great combination of income and growth.
Current yield: 2.2 percent
Digital Realty Trust (DLR)
Digital Realty is another interesting REIT that’s part of the digital age in a big way. DLR owns buildings full of servers, backup batteries and other high-tech gear that puts “the cloud” in cloud computing. Research firm Gartner estimates cloud spending will grow to nearly $190 billion by the end of this year — up 21 percent from 2017. That growth can’t occur without companies like DLR that provide the infrastructure. With partnerships with corporations like AT&T (T) and IBM (IBM), rent checks for that server space should keep coming.
Current yield: 3.5 percent
DiamondRock Hospitality Co. (DRH)
A leading provider of high-end resort accommodations, DRH has just 30 properties but a valuation of about $2.5 billion in posh locations like ski mecca Vail, Colorado, and Key West, Florida. The company also partners with leading brands such as Hilton and Marriott to provide boutique hotels in dense areas like Atlanta and the District of Columbia. With in-demand properties that consistently boast high occupancy rates, it’s easy for DRH to pass on a portion of that revenue to shareholders in the form of big dividend. And thanks to a focus on wealthy travelers in popular destinations, revenue should keep flowing to this company — and to its shareholders.
Current yield: 4 percent
Americold Realty Trust (COLD)
As the ticker symbol implies, COLD is in the business of refrigerated warehouses with some 930 million cubic feet of temperature-controlled space at home in the U.S. and abroad, including Australia, Canada and Argentina. Those facilities are used by thousands of individual customers, from small dairies keeping their milk and cheese cool to major brands like Unilever (UL) and Kraft-Heinz Co. (KHC). These facilities are an integral part of the food supply chain and that means a stable and reliable source of revenue for COLD. And for low-risk investors, there’s added appeal since frozen foods and veggies tend to sell well regardless of broader economic trends.
Current yield: 3.4 percent
Stag Industrial (STAG)
Stag owns and operates almost 400 buildings mostly serving as single-tenant properties including warehouses, manufacturing facilities and related industrial activities. In the age of e-commerce, the warehousing business is booming as merchants concentrate on logistics. As a result, the last few years have seen impressive revenue expansion and the stock is forecasting double-digit growth again in both fiscal 2018 and 2019. That reliable cash flow allows for monthly dividend payments instead of quarterly distributions — an added plus for investors looking for an income stream in retirement.
Current yield: 5.1 percent
Prologis (PLD)
Another warehousing REIT is logistics and storage company Prologis, which boasts about 700 million square feet of industrial space across some 3,300 buildings. This scale makes it among the biggest distribution names on Wall Street after the $8 billion acquisition of rival DCT Industrial earlier this year. Don’t think PLD is just spending its money on growth, however, as it has also increased dividends to shareholders. Payouts have jumped more than 70 percent in less than five years, from 28 cents at the end of 2013 to 48 cents currently.
Current yield: 2.9 percent
Ventas (VTR)
Ventas is one of the largest health care-related REITs, with a $20 billion valuation and portfolio of about 1,200 properties. These include senior living spaces, medical office centers and hospitals. It’s hard to argue against a health care investment in 2018, thanks to demographic shift taking place in the U.S. as baby boomers enter their golden years. According to the Population Reference Bureau, the number of Americans over age 65 will more than double to top 98 million by 2060 — making it a massive 24 percent share of the country’s population. That makes Ventas a reliable bet.
Current yield: 5.3 percent
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9 Ways to Get Income from REITs originally appeared on usnews.com
