Tags: high-yield | real estate investment trust | reit | retirement | income

3 High-Yield REITs With Safe Dividends

3 High-Yield REITs With Safe Dividends

Bob Ciura By Friday, 31 May 2024 01:21 PM EDT Current | Bio | Archive

Income investors looking for high-yield stocks with safe dividends should take a closer look at Real Estate Investment Trusts, or “REITs.”

REITs widely have high dividend yields, which make them appealing for income investors.

At the same time, stocks with high dividend yields often carry elevated risks. The following 3 REITs have high dividend yields, but also have secure payouts.

American Tower Corp. (AMT)

American Tower was founded in 1995 and is one of the world’s largest global Real Estate Investment Trusts (REITs). The company specializes in owning, operating, and developing multitenant communications real estate, with a portfolio of more than 224,000 communications sites, in the United States and Internationally. Last year, the $84.7 billion company generated $4.6 billion in Adjusted Funds from Operations (AFFO) attributable to stockholders.

In late April, American Tower reported (4/30/24) financial results for the first quarter of fiscal 2024. It grew its revenue 2% over the prior year’s quarter, as its customers keep investing in their 5G networks and data consumption keeps growing. Consolidated AFFO per share grew 10%, from $2.54 to $2.79, and exceeded the analysts’ consensus by $0.22.

The REIT benefits from the ramp-up of 5G in the U.S., Europe and some emerging markets. Its net-debt-to-EBITDA ratio improved from 5.2 to 5.0 but remains somewhat high for our safety standards. Thanks to positive business momentum, American Tower improved its guidance for 2024. It raised its guidance for growth of property revenue from 1.0% to 1.5% and its guidance for consolidated AFFO per share from $10.21-$10.45 to $10.30-$10.53, implying 6% growth at the mid-point.

American Tower has put together an exceptional record in the last decade, and many of those tailwinds still exist today. The company is well entrenched as a leader in the U.S. market and has also been significantly expanding abroad. The continued increase in data usage, especially as it relates to international countries “catching up,” will be a trend for some time. Moreover, with long-term leases in place, American Tower has good visibility into the future.

AMT has increased its dividend for 13 years and currently yields 3.4%.

Essex Property Trust (ESS)

Essex Property Trust Inc. invests in west coast multifamily residential proprieties where it engages in development, redevelopment, management and acquisition of apartment communities and a few other select properties. Essex has ownership interests in several hundred apartment communities consisting of over 60,000 apartment homes.

On May 1, 2024, Essex Property Trust, Inc. (ESS) reported strong first quarter results, reflecting significant growth and strategic advancements. The company announced a notable increase in core Funds from Operations (FFO) per share by 4.9%, which exceeded the initial guidance expectations. This performance was bolstered by a growth in blended lease rates of 2.2%, with renewal leases rising by 3.9% and new leases by 10 basis points.

Regionally, Seattle experienced a 3.6% increase in blended rates, while Northern California saw a 2.1% rise, and Southern California reported a 1.7% increase. The company's occupancy rate stood strong at 96% as of the end of April, and the same-property revenue growth forecast was revised upward by 55 basis points to 2.25% for the full year. Essex also improved its delinquency rate projection to 1.1% of scheduled rent for the year, showcasing faster than expected improvements.

Furthermore, the company made a significant $505 million investment in a joint venture portfolio which is expected to contribute nearly $2 million to FFO in 2024.

Essex Property Trust is a high-quality apartment REIT that has raised its dividend for 30 consecutive years from the time it first became a publicly-traded trust.

Digital Realty (DLR)

Digital Realty Trust is a real estate investment trust (REIT) that 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 more than 25 countries on 6 continents.

In 2023, Digital Realty created a joint venture with GI Partners for the sale of a 65% interest in two stabilized hyperscale data center buildings in Chicago, which earned DLR $743 million of gross proceeds. And in January 2024, GI Partners acquired an additional 15% interest in the JV (and now owns 80%) for $68 million of gross proceeds to DLR. In January 2024, Digital Realty created a $7 billion JV with Blackstone to develop four hyperscale data center campuses.

On May 2nd, 2024, Digital Realty reported first quarter 2024 results for the period ending March 31st, 2024. For the quarter, Digital Realty’s revenue came in at $1.3 billion, a 1% decrease compared to Q1 2023. During the quarter, the company generated $1.67 in core FFO per share compared to $1.66 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. Digital Realty’s dividend payout ratio (using FFO instead of earnings) is comparatively low for a REIT, which should give shareholders confidence that the dividend is relatively safe.

DLR has increased its dividend for 17 years and currently yields 3.4%.

Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.

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Income investors looking for high-yield stocks with safe dividends should take a closer look at Real Estate Investment Trusts, or "REITs."
high-yield, real estate investment trust, reit, retirement, income
Friday, 31 May 2024 01:21 PM
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