When I think about REITs (Real Estate Investment Trusts) I think about exposure to real estate and high yields. I don’t usually think about dividend growth.
There are right around 165 REITs (full list here) that we can invest in that yield 2%+ and trade above $5 a share. Almost half of these stocks have a positive 3 year dividend growth rate which is not all that surprising considering where we were 3 years ago. The real standouts are those companies that increase their dividend year after year.
Only 13 REITs have boosted dividends in each of the last 5 years, and only 9 have done it for 10 years. Because REITs are required to payout 90% of net income to shareholders I think it means more when a REIT can boost its dividend each year. It shows a solid track record of successful execution in increasing income.
A few of these stocks could soon find themselves on one of the best dividend lists. I like a lot of the stocks on this list, especially DLR, FRT and a few of the healthcare REITs. The current valuation of these stocks makes me want to take my time buying in.
| REIT | Symbol | Yield | Yrs of Div Increases |
|---|---|---|---|
| Health Care REIT | HCN | 4.43 | 5 |
| Digital Realty Trust | DLR | 4.76 | 7 |
| Equity Lifestyle Properties | ELS | 2.31 | 7 |
| Omega Healthcare Investors | OHI | 5.45 | 9 |
| Senior Housing Properties | SNH | 5.74 | 11 |
| Urstadt Biddle Properties | UBA | 4.72 | 14 |
| Realty Income Corporation | O | 4.31 | 15 |
| Essex Property Trust | ESS | 2.89 | 18 |
| HCP Inc | HCP | 4.29 | 19 |
| National Retail Properties | NNN | 4.35 | 19 |
| Tanger Factory Outlet Centers | SKT | 2.42 | 19 |
| Universal Health Realty Income | UHT | 5.43 | 19 |
| Federal Realty Investment | FRT | 2.68 | 45 |
REITs are not easy to evaluate but yield and dividend growth are a good place to start. It’s important to also factor in what the companies main focus of business is and what the future expectations are of that business. A lot of mortgage based REITs could be in for trouble when rates start to rise.
I’m steering clear of mortgage REITs, although I do want some exposure to real estate and am looking for some equity REITs since they are just essentially landlords. 45 years of increases for FRT is quite impressive given they have to pay out 90% of earnings every year. Looks like some very solid management there.