Bear markets hurt both investors’ stomachs and their wallets. If you are a new investor, consider using stocks to generate income. Unlike stock price gains, the market cannot take your dividends away from you once you receive them.
Real Estate Investment Trusts (REITs) are a great way to get paid while you sleep. They are unique businesses, structured to generate income by renting properties to tenants and then sharing the profits with shareholders in the form of dividends. Here are five fantastic REITs that should be on any new investor’s shopping list.
1. Real estate income: get paid monthly
Real estate income (O 1.36% ) specializes in leasing commercial properties to tenants, such as retail stores, cinemas, gyms and convenience stores. The company has increased its dividend over the past 28 years, in good times and bad.
Its dividend is paid monthly, which is rare compared to most companies that pay quarterly. Investors can capture a dividend yield of 4.5% in today’s stock price. The company generates approximately $2.9 billion in rent each year from its more than 11,000 properties. Its track record is top notch, with an A- rating of Standard & Poor’smaking Realty Income a stock that new investors can feel safe in.
2. Federal Real Estate Investment Trfair : Dividend royalty
Federal Real Estate Investment Trust (FRT -0.06% ) leases mixed-use and open-air shopping centers in neighborhoods surrounding major cities in the United States. These markets have higher income buyers, and Federal Realty has a grocery component in 75% of its properties, driving traffic in all economic situations.
This strategy has paid off for Federal Realty; it is a Dividend King, meaning a company that has increased its dividend for 50 consecutive years – 54 years in this case. Allowing ever-increasing cash spending as a dividend for so long speaks volumes about the quality of Federal Realty’s business. The stock’s dividend yield is 3.6% at the current share price.
3. Public storage: store your money in this market leader
public storage (APS 2.25% ) owns and operates approximately 2,500 self-storage facilities across the United States. Self-storage is a huge industry worth around $48 billion worldwide. Public Storage has generated $3.4 billion in revenue over the past 12 months, showing just how much room there is for future growth.
The company pays a strong dividend that yields 2.2%, although management has not increased the payout in a few years. However, funds from operations, the cash generated by a REIT, continued to grow. Investors must rely on the company to continue paying its dividend; the dividend payout ratio is an affordable 70% of cash flow.
4. Simon Property Group: shopping malls are always in style
Simon Real Estate Group (GPS 0.24% ) leases high-end shopping centers in the United States, Europe and Asia. While e-commerce has steadily drawn shoppers to digital channels, high-end malls like those owned by Simon Property Group continue to see heavy foot traffic, thanks in part to investments to transform its malls into ” destinations”, with entertainment venues and high-end restaurants. All of this is designed to create a shopping experience that consumers cannot replicate online.
Pandemic shutdowns have brought Simon Property Group’s operations to a virtual standstill and the company has cut its dividend to conserve cash. The company rebounded in 2021, growing funds from operations by 42% from 2020 to $1.16 billion. The dividend is also slowly returning, so the company’s long-term outlook appears stable as it recovers over the next few quarters. The dividend yields 5.1%, although it has not reached pre-pandemic levels.
5. American Tower: Increase dividends
American Tower (AMT 2.30% ) is the “pick and shovel” of communications; it owns and leases the land and towers that telecommunications companies use to broadcast their networks. It has more than 220,000 sites worldwide on six continents and in 25 countries. The company has been around since the mid-1990s, but officially became a REIT in 2012.
Since then, management has increased the company’s dividend every year and investors can earn a dividend yield of 2.3% at the current share price. Investors should sleep well holding American Tower, as cell tower sites are critical infrastructure for telecommunications companies. American Tower removes the cost and burden of land ownership from its tenants, so they are unlikely to default or uproot their cellular networks to move elsewhere, making American Tower a straightforward REIT for new investors.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.