If you are planning to pour your hard-earned money into the real estate investment trust (REIT) sector, or have already invested in it, then you must be wondering what the Fed policy will unfold this week, with inflation numbers still remaining high. But rather than worrying about how much the Fed will hike the interest rates, you should focus on the unique feature of this distinct asset class.
This is because this hybrid asset class not only provides protection against inflation but also benefits from the improving fundamentals of the underlying asset categories as well as the location of properties. Markedly, REITs invest in all types of properties, from residential, industrial, offices and malls to hospitals, hotels, data centers and several others. A number of these asset categories are presently showing strength.
And with the roller coaster ride in the stock market this year — thanks to high inflation and a quick rise in interest rates that is weighing on asset prices — the focus has now shifted to investing in quality companies with a consistent track of paying dividends. Obviously, this brings us to the REITs because solid dividend payouts are arguably the biggest enticements for REIT investors.
Income-seeking investors still have a large appetite for REIT stocks as U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends. This has enabled the industry to stand out and gain a footing over the last 15-20 years.
Ushering in good news for investors, particularly income-seeking ones, recently, a number of REITs declared their dividend hikes. Among them are Realty Income Corporation O, VICI Properties Inc. VICI and Innovative Industrial Properties, Inc. IIPR.
Also, REITs provide natural protection against inflation. Particularly, both rents and real estate values have a tendency to move north with prices increasing, thereby aiding dividend growth.
Now, let’s discuss these REIT stocks in detail:
Headquartered in San Diego, CA, Realty Income is engaged in the acquisition and management of freestanding commercial properties that reap rental revenues under long-term net lease agreements with commercial clients. This Zacks Rank #3 (Hold) stock has a market cap of $39.72 billion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Last week, Realty Income announced its 117th common stock monthly dividend hike since the company’s NYSE listing in 1994. Delighting its shareholders, the company will now pay 24.80 cents per share in the dividend compared with 24.75 cents paid earlier. The increased dividend will be paid out on Oct 14 to shareholders on record as of Oct 3, 2022.
The latest dividend rate marks an annualized amount of $2.976 per share compared with the prior rate of $2.97. Based on the company’s share price of $64.31 on Sep 16, the latest hike results in a dividend yield of 4.63%, ahead of the industry’s dividend yield of 4.24%.
The latest hike reflects Realty Income’s ability to generate decent cash flow through its operating platform and high-quality portfolio. It derives more than 90% of its annualized retail contractual rental revenues from tenants with a service, non-discretionary and a low-price-point component to their business. Such businesses are less susceptible to economic recessions and competition from Internet retailing and provide more reliable streams of income. Realty Income maintains high occupancy levels consistently, and its diversified tenant base, accretive buyouts and robust balance sheet bode well for its growth.
Based on the dividends paid over the trailing 4 quarters, the yield is 4.62%. Excluding the latest hike, Realty Income has increased its dividend 24 times in the last five years and the five-year annualized dividend growth rate is 3.04%. Check Realty Income’s dividend history here.
Realty Income Corporation Dividend Yield (TTM)
Realty Income Corporation dividend-yield-ttm | Realty Income Corporation Quote
New York, NY-based VICI Properties Inc. is an experiential REIT engaged in the business of owning, acquiring and developing gaming, hospitality and entertainment destinations. This Zacks Rank #3 (Hold) stock has a market cap of $32.19 billion.
On Sep 8, VICI Properties declared a quarterly cash dividend of 39 cents per share, denoting an 8.3% increase from the prior dividend rate. The increased dividend will be paid on Oct 6, to stockholders of record as of the close of business on Sep 22, 2022.
Based on the hiked rate, the annualized dividend comes to $1.56 per share. At this new rate, the annualized yield comes in at nearly 4.7% based on the stock’s closing price of $33.42 on Sep 16. This is ahead of the industry’s dividend yield of 3.92%.
Based on the dividends paid over the trailing 4 quarters, the yield is 4.31%. VICI Properties has increased its dividend 6 times in the last five years and the five-year annualized dividend growth rate is 11.77%. This is attractive to income investors and represents a steady income stream. Check VICI Properties’ dividend history here.
VICI Properties Inc. Dividend Yield (TTM)
VICI Properties Inc. dividend-yield-ttm | VICI Properties Inc. Quote
Innovative Industrial Properties, based in San Diego, CA, is engaged in the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated cannabis facilities. This Zacks Rank #3 (Hold) stock has a market cap of $2.56 billion.
Last week, IIPR announced a 2.9% hike in its third-quarter dividend to $1.80 per share from $1.75 paid in the prior quarter. The new dividend will be paid on Oct 14, to shareholders of record on Sep 30, 2022.
Based on the hiked rate, the annualized dividend comes in at $7.20 per share. At this new rate, the annualized yield comes in at nearly 7.9%, based on the stock’s closing price of $91.46 on Sep 16. This is ahead of the industry’s dividend yield of 3.92%.
Based on the dividends paid over the trailing 4 quarters, the yield is 7.65%. Also, Innovative Industrial has increased its dividend 14 times in the last five years, and the five-year annualized dividend growth rate is 65.98%. This is attractive to income investors and represents a steady income stream. Check Innovative Industrial Properties’ dividend history here.
Innovative Industrial Properties, Inc. Dividend Yield (TTM)
Innovative Industrial Properties, Inc. dividend-yield-ttm | Innovative Industrial Properties, Inc. Quote
IIPR has a solid business model to support its profitability over the long term and reward its shareholders simultaneously. The legalization of marijuana in the United States for medical and recreational use has opened opportunities for the cannabis industry, IIPR, in particular.
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