Income investors looking for higher levels of income should consider high dividend REITs. REITs typically own real estate properties that are leased out to tenants.This creates a steady stream of cash flow for REITs, a significant portion of which is paid to shareholders in the form of dividends.The following 3 REITs have strong property portfolios, and currently have dividend yields above the S&P 500 Index average.
Healthpeak Properties (DOC)
Healthpeak Properties is the largest healthcare REIT in the U.S., with 774 properties. It was the first healthcare REIT that was included in the S&P 500. This healthcare REIT invests in life science facilities, senior houses, and medical offices, with 97% of its portfolio based on private-pay sources.In late July, Healthpeak Properties reported (7/25/24) financial results for the second quarter of fiscal 2024. Same property net operating income grew 4.5% over the prior year’s quarter thanks to strong growth in the segment of continuing care retirement community and FFO per share remained flat at $0.45.The REIT faced a headwind due to the pandemic and thus its FFO per share declined in 2020-2021, in contrast to many REITs, which began to recover in 2021. It recently raised its guidance for annual FFO per share from $1.76-$1.80 to $1.77-$1.81.Healthpeak Properties benefits from favorable secular trends. As the baby boomer generation ages and the average life expectancy is on the rise, the senior population of the U.S. is expected to grow significantly in the upcoming years. The 80+ age group is expected to grow by about 5% per year on average until 2030.In addition, this age group has immense spending power, as its average net worth exceeds $640,000. Thanks to these trends, healthcare spending in the U.S. is expected to grow by about 5% per year on average until 2030.The recent merger with Physicians Realty is a major growth catalyst for the REIT. On March 1st, 2024, Healthpeak Properties closed its acquisition of Physicians Realty Trust (DOC) in an all-stock merger of equals valued at ~$21 billion. The new REIT expects to benefit from much greater scale and annual savings of up to $60 million by the end of next year, without a significant effect on its debt.The company’s balance sheet is gradually improving. Healthpeak Properties has sold several assets and has used the proceeds to reduce its debt. As a result, the REIT has received credit rating upgrades from S&P and Fitch (to BBB+) as well as Moody’s (to Baa1).DOC shares currently yield 5.4%.
Mid-America Apartment Communities (MAA)
Mid-America Apartment Communities (MAA) owns apartment communities in the Southeast, Southwest and mid-Atlantic regions of the U.S. Founded in 1977, it currently has ownership interest in 103,614 apartment units across 16 states and the District of Columbia and has a market capitalization of $18 billion.MAA aims to offer superior returns to its shareholders by focusing on the Sunbelt Region of the U.S., which has exhibited superior population growth and economic growth in the long run.In late July, MAA reported (7/31/24) financial results for the second quarter of fiscal 2024. Same-store net operating income edged up 0.7% over the prior year’s quarter, primarily thanks to growth in average rent per unit. Core funds from operations (FFO) per share dipped -3%, from $2.28 to $2.22, due to higher interest expense, but beat the analysts’ consensus by $0.02.MAA has missed the analysts’ FFO estimates only once in the last 25 quarters. MAA has decelerated in the last four quarters due to high supply of new apartments in its markets but the volume of new apartments has begun to lose steam, with fewer new apartments expected next year.MAA has benefited from its focus on the Sunbelt Region of the U.S., which has enjoyed higher economic growth than the rest of the country. About 60% of all the domestic moves occurred in the markets of MAA in the last nine years. MAA has grown its FFO per share at a 6.4% average annual rate over the last decade.MAA has increased its dividend for 13 consecutive years. MAA currently yields 4.5%.
American Tower Corp. (AMT)
American Tower was founded in 1995 and is one of the world’s largest global Real Estate Investment Trusts (REITs). The company specializes in owning, operating, and developing multitenant communications real estate, with a portfolio of more than 224,000 communications sites, in the United States and Internationally.In late July, American Tower reported financial results for the second quarter of fiscal 2024. It grew its revenue 5% over the prior year’s quarter, as its customers keep investing in their 5G networks and data consumption keeps growing. Consolidated AFFO per share grew 13%, from $2.46 to $2.79, and exceeded the analysts’ consensus by $0.21.The REIT benefits from the ramp-up of 5G in the U.S., Canada and India. Its net-debt-to-EBITDA ratio improved from 5.0 to 4.8. Thanks to positive business momentum, American Tower improved its guidance for 2024 for a second quarter in a row. It raised its guidance for growth of property revenue from 1.5% to 1.7% and its guidance for consolidated AFFO per share from $10.30-$10.53 to $10.48-$10.72, implying 7% growth at the mid-point.American Tower has put together an exceptional record in the last decade, and many of those tailwinds still exist today. The company is well entrenched as a leader in the U.S. market and has also been significantly expanding abroad. The continued increase in data usage, especially as it relates to international countries “catching up,” will be a trend for some time. Moreover, with long-term leases in place, American Tower has good visibility into the future.AMT currently yields 2.7%.More By This Author:3 Cheap High Dividend Stocks For Passive Income
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