Estate is one of society's oldest wealth-building strategies. World property is limited, yet people will always need it. Most investors lack the funds to invest heavily in real estate. REITs can assist. They offer investors the freedom of purchasing and selling shares and passive income from real estate. This April, investors should buy these three great REITs like crazy.
Why REITs are great dividend stocks REITs buy and rent property. They make attractive income stocks since they don't pay corporate income tax if they distribute at least 90% of their earnings as dividends. REITs often pay higher dividends than regular firms.
Real estate comes in many forms, as shown below. REITs focus on their strengths, usually real estate. Retail, hospitals, apartment buildings, warehouses, and more are examples. You can diversify your REIT portfolio and own different properties. Three amazing examples:
1. Logistics real estate leader REIT Prologis (NYSE: PLD) specializes on high-tech distribution hubs. Leases 1.2 billion square feet of real estate on four continents. Retailers and automakers are among its tenants. Its $120 billion market cap makes it one of the largest REITs.
Its dividend yield is just about 3% at today's share price. REIT dividends come from funds from operations (FFO), which are like corporate earnings. The dividend is well-funded. The dividend payout ratio is 56% of FFO today, and management's 10.3% payout hike should reassure shareholders. Prologis' dividend has increased for 10 years.
Earnings are expected to fall this year but climb by double-digits for future years. If Prologis's FFO rises 11% to 13% annually as analysts expect, the stock trades at 21 times its expected 2024 FFO, a fair price.
2. Blue-chip retail REIT Single-tenant retail assets are NNN REIT's specialty. Think fast-food, car washes, and petrol stations. More than 3,500 U.S. properties are owned by NNN, which signs 10-year leases for reliable revenue. It thrives in all economies because its tenants are recession-proof. In good times and bad, people need gas and fast food.
The company's dividend growth history supports this. Management has continually boosted the dividend for 35 years. Its 5% dividend at today's share price is attractive. A sustainable 64% FFO-based dividend payment ratio cushions the dividend.
You own NNN REIT for its consistent, high-yield dividend, not expansion. Its 13 times FFO valuation is modest since analysts expect its FFO to rise at a low-single-digit rate over time. Consider this REIT for low-stress passive income.
3. Public Storage (NYSE: PSA) is a self-storage giant with 3,300 centers nationwide. It runs the properties, unlike many REITs. Public Storage can quickly alter client pricing, which is cool. It has over 2 million clients, and the average tenant stays 7–10 months, which is beneficial if turnover is low.
It's not a dividend growth stock. Management has paid a special dividend and doesn't boost its quarterly dividend annually, but that doesn't indicate it's in jeopardy. The payout ratio is 67% of FFO, and investors gain over 4% at the present share price.
In the future years, analysts expect low-to-mid single-digit FFO growth. This REIT won't increase much, but it will give your portfolio regular income and piece of mind. Today, the stock trades at a respectable 17 times FFO.
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