Real estate investment trusts or REITs can be eccentric security for anyone looking for a meaningful investment portfolio for income generation. Typically, REITs are known to generate higher dividends revenues than other available stocks you will find in the market. The performance in the market has resulted in REITs becoming the most popular options that investors are jumping into to seek regular income. A good REITs trust should distribute over 90% of the returns it yields each year to maintain its trust-free status. Therefore, this means to investors that they can relatively get high dividend payments and suitable consistent dividend policies from this portfolio which has unique business models that create a steady income for the long term. This article is a guide on five of the best REITs with Quickly Growing Dividends to consider. As much as REITs offer high yields to investors, there are some which perform better than others that you should pay a closer eye on if you want to venture into this line of investment. According to Motley Fool, the average REIT dividend yields about 3%. This is more than the S&P 500s. Those performing even better that you should consider are;
5. Four Corners Property Trust (FCPT) (6.9% yields)
Four Corners was established in 2015 after its spin-off from Darden Restaurants (DRI). This real estate trust was formed primarily to help investors acquire and lease various restaurant properties. This REIT is structured as a triple-net lease. Therefore, tenants are responsible for maintenance, insurance, and taxes. The performance results are vital because it has maintained operating margins in the range of 80% to 90%, which is better than most shopping center REITs yielding 65% operating margins. FCPT has withstood even the pandemic period by posting record funds from operations per share over the last two years. It collected 99.8% from rental payments in the second quarter, and its rental revenues grew by 11 % from last year's results. Adjusted funds from this REIT also grew by 12%, from $0.34 to $0.38.
4. Gladstone Commercial (6.9% yields)
Gladstone Commercial is another great REIT that has diversified its operation to focus primarily on office buildings and industrial facilities. In addition to that, this REIT also has medical office buildings and rental properties. Gladstone's diversification into various portfolios produces a very stable cash flow for the company. According to Forbes, the funds the company generates from operations(FFO)per share has improved from $1.53 to $1.58 within the last five years operation. This helps significantly in supporting the company's monthly dividend per share of $0.125275. This REIT has a high dividend payout ratio, with the monthly dividend contributing to the annual share by $1.5033 per share, resulting in its payout being more than 95% of the firm cash flow.
3. Sabra Health Care REIT (9.1% yields)
Sabra Health Care REIT was established to cater to senior housing nationwide. This REIT also has various specialty hospitals and transitional care facilities that serve America's higher aging population. These properties generate high rents for the company and low vacancy rates. Sabra was affected by the pandemic as most tenants were struggling to submit their rent. In addition, the occupancy level at some of their properties also declined, which affected the firm net operating income. Still, the firm is on the road to recovery as most of its tenants are beginning to recover, and the firm is now finding a workable solution by creating an amendment solution that suits both the firm and its tenants. This REIT has generated $2.31 per unit in the adjusted fund from its regular operations (AFFO). It also pays out a distribution of $1.73 per unit. According to Income Investors, the payout will continue to grow yearly about 365,000 baby boomers clock 65, meaning the demand for its specialized medical facility and rental prices will continue to grow and create to the firm a decent stream of income.
2. Office Income Properties Trust (9.6% yields)
Office Income Properties Trust focuses its operation on office investment. The focus on the office weighs upon this REIT, considering that most of its leases are on the verge of reaching an expiring period over the next few years. This REIT has so many older properties located in less desirable markets, affecting new clients' occupancy and lease rates in the new future. The positive thing is that the firm has maintained a conservative dividend payout ratio of 69%, even if it's below the company's 75% target. This has helped the company retain significant cash that the firm could use to complete its capital recycling strategy by disposing of most of its older assists properties in areas with less desirable markets and acquiring higher quality ones in markets areas performing better. If the firm will execute its entire plan seamlessly and sort most of its upcoming expiring lease term. This could help the firm significantly to establish a firm foundation and maintains an attractive payout.
1. Global Net Lease (11% yields)
Global Net Lease is a REIT that has diversified its operation into offices building space, industrial buildings, and several retail facilities. Diversifying into high-yielding portfolios has helped the company create a stable cash flow. GNLs FFO has maintained consistent AFFOs in the range of $2.00 and $2.25, which could remain stable due to the firm's triple-net structure. Even during the financial crisis, individual assets were affected, and not the entire portfolio remained exceptionally stable. GNL has a 75% investment-grade tenancy and has maintained a low concentration and strength on its properties tenancy level. Therefore, their contractual revenue is high quality and fairly low risk. The long duration that most of its clients who have long contractual rent will continue to generate the firm a steady stream of attractive cash flow.
REITs continue to appeal to income investors because of the high yields they generate. The above 5 REITs we have touched on look attractive on the surface, but investors should note that abnormally high yields come with elevated risks. Watch out for each of them and how they behave in the coming days, even if they continue to increase the dividend ratio each year.
Written by Allen Lee
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