If you ask an expert income investor, they will tell you that the best REIT’s (real estate investment trusts) do just fine as rates rise. It has always been this way since landlords will always raise their rents. Higher cash flows result in higher dividends and thus higher stock prices. This is regardless of what the Fed is up to.
Most investors are worried about the Federal Reserve’s recent change in policy. This shouldn’t, however, worry you because if you do take a look at the broader stock market, REIT’s have performed quite well.
For instance, when you compare to the S&P 500, REIT’s did perform better over the past few years. This is despite the full index heavily weighted on tech giant stocks like Google, Apple, and Facebook.
There are some investors that might suggest you should avoid REIT’s when the rates are rising. But, when you think of it in matters regarding performance, rising rates signify economic growth. Meaning that the earnings should also increase. Anyways, at the moment, the Fed’s change in policy has aided put to rest the fear of interest rate increments.
To help you make an informed choice, below we have analyzed four dividends paying REIT’s with over 5% yield. Remember, before investing in REIT’s you should always consider your objectives and the REIT’s specialty and growth prospects. Before we jump into in it, lets quickly cover what a REIT is.
What is a REIT?
A REIT is a Real Estate Investment Trust that is basically a portfolio of real estate investments where investors can purchase shares of the trust and collect on the income received from the properties. This allows smaller investors the opportunity to own real estate with out having to fork over a lot of capital.
REIT’s can own a ton of different types of property and be specific to different industries such as healthcare buildings or rental properties or they can be diversified and own a wide range of properties. It’s important to read each REIT’s prospectus to understand their objectives and if there are any fees associated with them.
Iron Mountain
Dividend Yield: 6.84%
Iron Mountain (NYSE: IRM) is more than a data center REIT. It provides a variety of high tech solutions like media restoration, imaging services, and data center storage. The company also indulges in physical documenting services such as shredding, securing or storing media.
In the past three years, Iron Mountain shocked many when it increased its funds of operations by 26%. With Iron Mountain, you can be assured of a pay-out hike since it does pay out 73% of its funds as dividends.
Macerich Co.
Dividend Yield: 6.89%
Currently, Macerich (NYSE: MAC) is a high-end retail REIT with at least 48 properties in the United States. It was founded by Mace Siegel, Dana K and a couple of other investors back in 1964. In the past decade, Macerich Co. has moved from a stagnant performance standpoint to a thriving enterprise. This is due to the introduction of occupancy ails and flexible workplaces in its malls. Nonetheless, we can expect Macerich to announce a payout boost.
Kimco Realty Corp.
Dividend Yield: 6.38%
As at the end of last year, Kimco Realty (NYSE: KIM) had an ownership interest in 475 shopping centers within the US. This makes it one of the largest owners of shopping centers in the United States. The company has focused on the biggest cities. The company will, however, be weighed down by some of its tenants that are facing financial difficulties. They are however opting to acquire more property so that they can boost their growth.
Weyerhaeuser
Dividend Yield: 5.26%
Weyerhaeuser (NYSE: WY) recently noted a 1.45% ticker thus finding its place among dividends paying REIT’s with over 5% yield. The company deals with not only manufacture, distribution and sale of forest products but they also indulge in real estate.
Its real estate and energy department focuses on providing timber and properly using land with the aim to bettering dividends. Weyerhaeuser has grown its dividends in the last consecutive six years. This is evidence that this company is on the verge of growth and investors can expect more from it.
Final Thoughts
Is income is your primary objective? Then a high dividend paying REIT with over a 5% yield can be an excellent investment option. Moreover, another beauty of REIT’s especially to income investors is that dividends are distributed yearly to shareholders. And, to make matters even better, REIT’s do not pay corporate taxes.
