If you have $1,000 to put to work buying equities today, there are plenty of attractive dividend stocks to consider. Three of the most interesting right now are Rexford Industrial(NYSE: REXR), Realty Income(NYSE: O), and EPR Properties(NYSE: EPR), with yields ranging from 4.3% to 7.6%. Here’s a look at each one of these high-yield real estate investment trusts (REITs) to get you started.
Rexford Industrial is a highly focused REIT with an industrial portfolio that is located entirely within the attractive Southern California market. There is no doubt that having so much focus in the property portfolio will put many investors off, but Southern California happens to be a very attractive industrial market. It is one of the largest in the nation and has high barriers to entry. Its vacancy rates are normally below the country’s average. Rexford has been able to jack rents up at a very aggressive pace. To put a number on that, in the third quarter of 2024, rent on new leases rose 39% over the prior lease.
That’s impressive, but investors have soured on the industrial REIT story, and Rexford’s stock is down over 50% from its 2022 high-water mark. The dividend yield is now a historically high 4.3%. However, the real draw with Rexford is the dividend growth that has come along with huge rent increases. Over the past decade, the average annual dividend increase was roughly 13%, which is huge for a REIT and, in fact, pretty great for just about any company. If you are a dividend-growth investor, Rexford should be on your short list today.
Realty Income is the largest net lease REIT. A net lease requires the tenant to pay for most property-level operating costs. Although any single property is high risk, a large enough portfolio can miitgate the risk significantlly. Realty Income owns over 15,400 properties. It also spreads its portfolio across the retail and industrial sectors and has assets both domestically and in Europe. Add in an investment-grade rated balance sheet for good measure and you get a very reliable, though also kind of boring, dividend payer.
But if dividend consistency is important to you, there are few companies that compare to Realty Income. It has raised its dividend annually for three decades. The average annual increase over that span has been roughly 4.3%. With a yield of roughly 6%, that means investors can probably expect returns, over time, to hover around 10%, which is roughly the long-term average of the broader market. Nothing about Realty Income is going to excite you, but that’s the point. This high yielder should probably be in your portfolio right now if you like reliable income stocks.
Perhaps you are looking for something a bit more exciting. If that’s the case, you’ll likely find turnaround play EPR Properties of interest. When the COVID-19 pandemic hit, this experiential focused REIT completely suspended its dividend. That made sense given the uncertainty at the time since many of its tenants were effectively shut by the government because they operated things like movie theaters and amusement parks. Definitely not necessity businesses. Now that the world has gotten used to living with the coronavirus, EPR Properties’ dividend is back. The yield is a lofty 7.6%.
There are two stories taking shape within EPR Properties’ portfolio. The more attractive story is that the majority of its tenants are now in better financial shape than they were prior to the pandemic, highlighted by improving rent coverage. The other story, which isn’t exactly bad, is that the heavy portfolio concentration in movie theaters (at roughly 36% of rents) is, by design, slowly being pared down. However, the movie theater exposure is also a problem spot given that movie theater rental coverage is below where it was prior to the pandemic. This helps explain why the dividend has come back and is growing again, but it is still at a lower level than it was at prior to the pandemic. And yet, with a funds from operations (FFO) payout ratio of 66% in the third quarter of 2024, this high-yield turnaround play really does look like it is offering a decent risk/reward balance today.
The broader market is expensive right now, but that doesn’t mean you won’t be able to find good investment ideas. If you are a dividend lover, Rexford, Realty Income, and EPR Properties are all high-yield stocks that should be on your radar screen right now. Spanning from dividend growth to a turnaround play, there’s something for just about everyone here. If you have more than $1,000, you might find you want to buy more than one of these high yielders.
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Reuben Gregg Brewer has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends EPR Properties and Rexford Industrial Realty. The Motley Fool has a disclosure policy.
