3 Top REITs For Dividend Investors

Income investors are typically interested in stocks with reliable and secure dividends, even during recessions. For this reason, income investors should consider adding REITs to their stock portfolios.

Real Estate Investment Trusts, or REITs, can be a good choice for income investors, as their real asset business offers passive income and often trade with higher yields than most other sectors. 

In this article, we will highlight three REITs that look strong from an income perspective. 

Digital Realty (DLR)

Digital Realty Trust is a leader in buying and developing properties for technological uses. Digital Realty’s properties are a combination of data centers that store and process information, technology manufacturing sites and Internet gateway datacenters which allow major metro areas to transmit data. The company operates over 300 facilities in 28 countries on 6 continents. 

On July 25th, 2024, Digital Realty reported second quarter 2024 results for the period ending July 25th, 2024. For the quarter, Digital Realty’s revenue dipped 1% year-over-year to $1.3 billion. During the quarter, the company generated $1.65 in core FFO per share compared to $1.68 per share in the prior year period. Digital Realty reaffirmed its 2024 guidance, and still expects $5.55 billion to $5.65 billion in revenue and $6.60 to $6.75 in core FFO. 

Since 2010 Digital Realty increased its FFO-per-share by an average compound rate of 6.1% per year. Acquisitions are a major component of Digital Realty’s growth. For example, in 2017, Digital Realty completed its purchase of DuPont Fabros Technology, a REIT that leased properties to some of the largest tech companies in the world. In 2020 Digital Realty acquired Interxion, a provider of cloud data centers in Europe. 

Digital Realty has increased its dividend for 17 consecutive years. The stock has a 3.0% dividend yield. With a dividend payout ratio of approximately 73% of projected FFO for 2024, the dividend is relatively safe. 

Digital Realty’s main competitive advantage is that it is among the largest technology REITs in the world. This gives the REIT a size and scale advantage that competitors have difficulty matching. In addition, the company has proven to be able to utilize its balance sheet to fund acquisitions in order to grow FFO and revenues.

W.P. Carey (WPC)

W.P. Carey is one of the largest net lease REITs in the US with a market capitalization of more than $13 billion. The world of net lease REITs is highly fragmented, and W.P. Carey’s scale is therefore quite attractive in terms of its portfolio diversification.

The trust owns a portfolio of 1,200+ net lease properties that are operationally-critical, and cover more than 140 million square feet of leased space. W.P. Carey specializes in single-tenant industrial, warehouse, office, retail and self-storage properties with built-in rent escalations. The trust operates primarily in the US, but has some exposure to parts of Europe as well.

For its fiscal second quarter, W. P. Carey reported that its revenues totaled $390 million, which was 14% less than the revenues that W. P. Carey generated during the previous year’s period, due to its portfolio reduction over the last year. Revenues came in slightly below the analyst consensus estimate, missing it by $5 million. During the second quarter, the trust was marginally more profitable than the analyst community had expected, as adjusted funds-from-operations came in at $1.17 on a per-share basis, beating the consensus estimate by $0.01. Adjusted funds-from-operations were down by 14% on a per-share basis compared to the previous year’s quarter. W.P. Carey has updated its guidance for 2024, forecasting funds from operations in a range of $4.63 to $4.73 on a per share basis,

FFO-per-share declined during the pandemic but improved on a year-over-year basis in 2021 and 2022. W. P. Carey invests additional money into new properties continuously. Since 2012 the REIT invested more than $10 billion into new assets by either purchasing entire REITs or through asset/portfolio purchases. W. P. Carey can access debt markets at favorable rates, which lowers the trust’s cost of capital, which then allows for improved investment spreads.

W.P. Carey was founded in 1973 and generates about $1.3 billion in annual revenue. WPC stock yields 5.9%.

Equity LifeStyle Properties (ELS)

Equity LifeStyle Properties owns and operates lifestyle-oriented properties consisting primarily of manufactured home and recreational vehicle communities. Equity LifeStyle Properties operates through the following segments: Property Operations; and Home Sales and Rentals Operations. The Property Operations segment owns and operates land lease properties. The Home Sales and Rentals Operations segment purchases, sells, and leases homes at the properties. 

On July 22nd, 2024, Equity LifeStyle Properties reported second-quarter earnings for Fiscal Year (FY)2024. The company net income per common share for the quarter increased to $0.42, a 24.3% rise from $0.34 in 2023. Funds from Operations (FFO) per common share and OP unit grew to $0.69, up 13.5%, while Normalized FFO reached $0.66, a 2.9% increase. 

For the six-month period, net income per common share rose by 29.4% to $1.01, and FFO per common share and OP unit increased by 16.6% to $1.55. Normalized FFO saw a 5.9% rise to $1.44. 

Operational highlights include a 4.6% increase in core property operating revenues and a 5.5% rise in core income from property operations, excluding property management, for the quarter. 

The manufactured housing (MH) segment reported a 6.2% increase in base rental income, primarily due to rate hikes and occupancy gains. Additionally, 255 new homes were sold at an average price of approximately $89,000.

Its competitive advantage is that Equity LifeStyle has a national presence and excellent reputation within the industry, which allows the Trust to pursue opportunities to increase customer service and deliver quality earnings for shareholders. 

ELS has increased its dividend for 19 consecutive years and currently yields 2.7%.