Look beyond the obvious for real estate income.
Many investors see the potential of real estate as an income strategy. The idea of an apartment property or office building drawing regular rent checks is appealing if you want a reliable stream of cash from your portfolio. However, there are plenty of other real estate investments that can produce a steady flow of money. These involve communications assets, health care facilities or even entertainment venues. These companies are structured as real estate investment trusts, or REITs, a special class of stock that must deliver 90% of its profits back to shareholders. This is a mandate for big dividends. Looking for more interesting ways to get income off the real estate sector? Consider these nine unconventional REITs.
American Tower Corp. (ticker: AMT)
Investors may not think of cell phone towers when they go looking for real estate assets. However, AMT is not just one of the largest telecom stocks but also one of the largest REITs on Wall Street. The stock boasts a market capitalization of more than $90 billion, and a portfolio of approximately 170,000 communications sites. There's not a lot of growth ahead for AMT, but that's not the appeal. Rather, the company generates consistent revenue by leasing sites on its towers to telecom operators -- and in turn, passes a share of that cash on to shareholders via steadily growing dividends.
Current yield: 1.6%
If you like the idea of generating income from an increasingly wired society, then consider CyrusOne. This stock focuses on "carrier neutral" data center properties -- meaning a warehouse of servers that offer communications technology infrastructure services for all manner of businesses. The firm boasts 1,000 clients across its various locations. Unlike entrenched tower operator AMT, CONE also has a decent potential for growth ahead as many businesses increasingly are moving to the cloud by offloading data storage, cybersecurity applications and other high tech needs to offsite firms like CyrusOne.
Current yield: 2.7%
Speaking of securely holding assets of a very different kind, CoreCivic is a corrections and detention management company that is enlisted by local governments to operate prisons or "residential reentry centers" to help assist with the safe reintegration of former criminals into society. CXW has been a partner on private prisons for more than 35 years, meaning relatively long term contracts and deep connections with governments that help lead to consistency in both revenue for the company and dividends for its shareholders.
Current yield: 9.8%
Cousins Properties (CUZ)
An incredibly specialized REIT, Cousins is an Atlanta-based office tower operator that focuses only on "high-growth Sun Belt markets" such as Charlotte, North Carolina; Phoenix and Dallas. Founded in 1958, Cousins creates architecturally interesting high rises and fills them up with high quality office tenants in the middle of key urban areas. It's a very one dimensional approach, unlike other diversified investment trusts that tend to focus on wider geographies, a wider tenant base, or both. However, this targeted approach may appeal to those who see the obvious potential of these up-and-coming cities compared with all the other investment options.
Current yield: 3.2%
Essential Properties Realty Trust (EPRT)
Speaking of targeted real estate investments, EPRT is a real estate company that manages only "single-tenant properties." These assets are exactly what they sound like: A building that only has a single business inside it. Think free standing restaurants, car washes, convenience stores, movie theaters, day cares or any other single use properties you pass every day around town. It's an interesting strategy because it's diversified across a wide array of business types, but the properties themselves are very much reliant on a single company's fate. Essential Properties must be doing something right, however, since shares are up a stunning 65% in the last two years alone.
Current yield: 3.9%
Gaming and Leisure Properties (GLPI)
Gaming and Leisure Properties is a firm based on gambling -- but based on its strong presence in key markets from Massachusetts to Louisiana and Colorado to Ohio, this real estate operator seems like a pretty safe bet. That's because it is diversified across regions with little competition for gaming, and also because its properties operate under "triple net lease" arrangements where the tenant is responsible for maintenance, insurance and taxes. In other words, GLPI builds these casino sites then just collects rent checks afterwards. That makes for a reliable revenue stream that isn't dependent on the ups and downs of any economic trends. That adds up to steady dividends for investors in this REIT, too.
Current yield: 7%
Hannon Armstrong Sustainable Infrastructure Capital (HASI)
Though the name is pretty darn long, the approach of HASI is pretty simple: The firm provides capital to energy efficiency, renewable energy and sustainable infrastructure companies across the United States. Much in the way that there are mortgage-focused REITs that deal largely in residential real estate debt, Hannon Armstrong finances solar sites, power grid projects and other infrastructure efforts related to a clean energy future. Given the focus on carbon emissions and global warming, it's easy to see why there is a nice tailwind behind this specific corner of the real estate industry. And since HASI is structured as a REIT, investors can target income potential instead of hoping solely for share appreciation in what can be a competitive marketplace.
Current yield: 4.8%
Urban Edge Properties (UE)
Urban Edge is a REIT that acquires, develops and improves shopping centers in key urban communities. It's a unique twist on real estate investing when many brick and mortar retail locations are struggling -- and UE has decided to make targeted bets on which ones have potential if they were made more appealing. The roughly $500 million company is comparatively modest in size, with "only" 16.3 million square feet across 88 properties mostly in the highly populated Mid-Atlantic corridor between the District of Columbia through New York City and up to Boston. It's a quirky take on real estate investing, but one that could generate nice income over the long run.
Current yield: 4.4%
Physicians Realty Trust (DOC)
DOC owns and manages health care properties that primarily house doctors' offices and outpatient facilities. Known as "DocREIT," this company has roughly 250 locations with an average size of about 54,000 square feet -- making the typical property fairly modest, and more of a community health care center than a massive hospital. The company operates in dozens of markets across the U.S. from Alabama to Washington state. Health care is considered a recession-proof sector, and local doctor offices like these are sure to see a consistent flow of patients in any economic environment. That creates plenty of stability that leads to consistent dividends for shareholders.
Current yield: 5.3%
Top obscure REITs to buy:
-- American Tower Corp. (AMT)
-- CyrusOne (CONE)
-- CoreCivic (CXW)
-- Cousins Properties (CUZ)
-- Essential Properties Realty Trust (EPRT)
-- Gaming and Leisure Properties (GLPI)
-- Hannon Armstrong Sustainable Infrastructure Capital (HASI)
-- Urban Edge Properties (UE)
-- Physicians Realty Trust (DOC)
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