From high yields to rapid dividend growth, these three REITs cover a lot of ground. All are worth digging into as November begins.
Real estate investment trusts (REITs) are designed to return income to investors in a tax-advantaged manner. But not all REITs are the same. Those looking for higher yields may want to consider WP Carey. (WPC 1.85%) In November. Dividend growth types should dig into Rexford Industrial Realty (Rex 1.22%). For investors for whom dividend reliability is paramount, Federal Realty Investment Trust is a good choice. (FRT 0.62%) It might be the right choice. Here we briefly discuss each of these attractive high-dividend REITs.
1. WP Carey rips off the Band-Aid.
There is no way around this. WP Carey cut its dividend at the beginning of 2024. This decision comes as the company has chosen to exit the office sector, which previously accounted for 16% of its rental income. This is too much rent to lose without reducing the dividend. However, with the office sector in deep recession, this decision was probably the right one for the REIT and its shareholders in the long run. Still, investors aren’t satisfied, and WP Carry needs to regain Wall Street’s confidence.
This is a big reason why REITs offer an attractive dividend yield of 6.3%. It’s important to note that the dividend has returned to its quarterly growth rate prior to the cut. This suggests that the dividend cut was actually just a reset. This makes sense given the overall picture, which was the choice to exit just one of several real estate sectors. The company continues to operate in multiple geographic regions (primarily the United States and Europe) with warehouse, industrial, and retail property types. If you’re willing to give management a questionable return, you can get a high yield from one of the most diversified REITs on the market. Given enough time, it seems likely that WP Carey will turn the business around and prove that this difficult decision was a wise one.
2. Rexford Industrial focuses on prime location
The first thing investors should know about Rexford Industrial is that the company has increased its dividend by a hefty 13.5% annually over the past decade. At 3.9%, the dividend yield isn’t great, but when you factor in dividend growth, the REIT’s story becomes very compelling to a select group of investors. In fact, the 13.5% growth rate is roughly four times the historical inflation growth rate. Over time, this REIT has meaningfully expanded investors’ spending power through dividends.
There is one caveat. Rexford has a strong focus on industrial land in one geographic area: Southern California. That seems risky, and in some ways it is. But Southern California is one of the world’s largest industrial markets, and its position as a gateway between Asia and the United States has constrained supply and remains in huge demand. But the really important number is that Rexford estimates that it only owns around 3% of the real estate in this market. As such, it stands to benefit from rapid rent growth and new investment in the region, both through acquisitions and redevelopment. If you like dividend growth stocks, Rexford has a very compelling story.
3. Federal Realty is the king of REITs
If you’re retired and trying to live off the dividends your portfolio generates, you probably aren’t interested in talking about dividend growth or recovery. Dividend reliability may be most important. This is where Federal Realty comes into play. It has continued to increase annual dividends for the longest period of time as a REIT. 57 consecutive dividend increases here make Federal Realty the Dividend King. Admittedly, its roughly 4% yield isn’t the highest in the REIT sector, but if you value dividend reliability above other factors, this is the perfect REIT for your portfolio.
Interestingly, Federal Realty accomplished this feat with an unusual business approach. We value quality over quantity and have only about 100 properties in our portfolio. That being said, these are very well located and highly desirable properties. REITs also have a long history of redevelopment and active portfolio management. As such, the company is constantly looking to upgrade its business, and that’s clearly working out well for investors over time. If you want a good night’s sleep while receiving your dividend check, add Federal Realty to your portfolio today.
Different REITs for different people
Too often, investors view sectors such as REITs as a general group. In most situations this isn’t the case, but if you’re willing to dig beneath the surface, there are a variety of unique options waiting to be discovered. In the REIT space, you can earn high yields from low-risk turnarounds with WP Carey, enjoy significant dividend growth with Rexford, or create a reliable income stream with Federal Realty. Either of these options could be a great addition to your dividend portfolio in November.
Reuben Greg Brewer holds positions at Federal Realty Investment Trust and WP Carey. The Motley Fool has a position in and recommends Rexford Industrial Realty. The Motley Fool has a disclosure policy.
