Several real estate investment trusts (REITs) yield 4% or more, offering double-digit growth in some cases. They are considered ideal for buying, holding, and reinvesting dividends.
Real estate is a timeless asset class, but many individual investors lack the necessary connections, knowledge, and resources to invest in commercial properties. This is where real estate investment trusts (REITs) come in. These publicly traded companies acquire and lease real estate, distributing at least 90% of their taxable income to shareholders as nonqualified dividends, making them appealing to dividend investors.
Three notable REITs exemplify strong financials, a resilient dividend history, and attractive valuations, making them suitable for a $1,000 investment:
1. Realty Income
Known as the "monthly dividend company" for its monthly payouts, Realty Income owns and manages over 15,000 properties in the United States and Europe. Specializing in net leases on single-tenant retail properties, its stock has been affected by high interest rates, resulting in a dividend yield of approximately 5.5%. However, the dividend payout ratio remains at only 76% of its 2024 funds from operations (FFO), and the company has increased its dividend for 32 consecutive years. Trading at 14 times its FFO, Realty Income presents a solid long-term investment opportunity for those interested in reinvesting dividends.
2. Rexford Industrial Realty
Rexford Industrial Realty manages over 400 industrial properties in Southern California, supporting tenants across various industries. With a dividend yield of 5.3%, the company’s payout ratio is at 73%, covering the dividend comfortably. Since its public offering in 2014, Rexford has raised its dividend annually, showing resilience even during challenging times like the COVID-19 pandemic. With an FFO growth of 16% annually over the last five years, Rexford offers a blend of growth and yield, benefiting from scarce developable land in its region.
3. Prologis
Prologis capitalizes on the growth of e-commerce by developing and leasing properties for supply chain and logistics purposes globally. Key tenants include Amazon, Home Depot, FedEx, and UPS. Prologis boasts a 4% dividend yield and has demonstrated a 12% annual growth in FFO over the past five years. Having raised dividends for 11 consecutive years, the company’s payout ratio is a modest 72% of 2024 FFO. Prologis maintains an "A" credit rating from S&P Global, validating its strong financials, and is well-positioned to continue growing as demand for e-commerce increases.
These REITs represent robust investment options due to their reliable yields and growth potential.
