3 High Dividend REITs With Yields Over 6%

Interest rates remain high, but the S&P 500 Index still yields just 1.6% on average. For many investors, such as retirees, this simply is not enough income. Investors looking for higher levels of income should consider high dividend REITs.

Real estate investment trusts typically own real estate properties that are leased out to tenants. With the cash flow from rents, REITs invest the proceeds in acquiring new properties. This creates a steady stream of growth over time, which then allows REITs to distribute a high level of cash to shareholders. The result is that REITs can be a passive investment for income.

The following three REITs have strong business models, and currently have dividend yields above 6%.

A King-Sized Dividend Yield

Crown Castle International CCI was founded in 1994 and has since become a powerhouse in the data infrastructure business. It owns cell phone towers with small cells where larger towers are not feasible, and fiber connections for data transmission. The trust owns, operates and leases more than 40,000 cell towers and 80,000 route miles of fiber across every major U.S. market, helping it to support data infrastructure across the country.

Crown Castle posted first quarter earnings on April 17, and results were better than expected on both the top and bottom lines. Funds from operations came to $1.72 per share, which was three cents ahead of estimates. Revenue was off more than 7% from the year-ago period, coming to $1.64 billion. That did beat estimates by $10 million, despite the big move down. Site rental revenue was $1.59 billion, down from $1.62 billion a year ago, while services and other revenue plunged from $149 million to $53 million year-over-year.

The trust’s robust cash flow generation will afford it the opportunity to continue to pay the ample dividend. Crown Castle’s penchant for buying growth will help expand the top line, in addition to small organic revenue gains.

We think the future is still bright as consumers demand more and more access to data over time, and Crown Castle is poised to deliver, but short-term challenges remain. In addition, its portfolio is centered in metropolitan areas with favorable long-term demand outlooks, so the trust is well positioned in a variety of ways.

The trust continues to pay most of its earnings out as dividends, as it is required to do as a REIT. The current payout ratio is 91% of FFO. We forecast continued relatively modest increases in the payout, around that of FFO growth, and we believe the payout is safe for now. 

CCI stock currently yields 6.5%.

This Dividend Aristocrat Pays Monthly

Realty Income O is a retail-focused REIT that has become famous for its successful dividend growth history and monthly dividend payments. Today, the trust owns thousands of properties. 

Realty Income owns retail properties that are not part of a wider retail development (such as a mall), but instead are standalone properties. This means that the properties are viable for many different tenants, including government services, healthcare services, and entertainment.

Realty Income exceeded revenue expectations in the first quarter of 2024, reporting $1.26 billion in revenue following $598 million in investment volume. Its earnings slightly surpassed predictions, with normalized FFO per share reaching $1.05, a penny higher than the analyst estimate. This figure marked an increase from $1.00 in the previous quarter and $1.04 in the first quarter of 2023.

Company management reaffirmed its 2024 guidance for normalized FFO and same-store rent growth, with expectations of acquisition volume around $2.0 billion.

Realty Income generates its growth through growing rents at existing locations, via contracted rent increases or by leasing properties to new tenants at higher rates, but also by acquiring new properties. Realty Income expects to increase its investments in international markets moving forward.

It made a first deal in the U.K. in 2019 and plans to do more such deals in the future when it finds attractive targets. These acquisitions will help drive profits in the long run.

Realty Income has increased its dividend for 27 years, and is on the exclusive list of Dividend Aristocrats. 

The stock currently yields 6.0%.

What's Up DOC?

Healthpeak Properties DOC is the largest healthcare REIT in the U.S., with 774 properties. It was the first healthcare REIT that was included in the S&P 500. This healthcare REIT invests in life science facilities, senior houses, and medical offices, with 97% of its portfolio based on private-pay sources.

In late April, Healthpeak Properties reported financial results for the first quarter of fiscal 2024. Same-property net operating income grew 4.5% over the prior year’s quarter thanks to strong growth in the segment of continuing care retirement community and FFO per share rose 7%, from $0.42 to $0.45.

Healthpeak Properties benefits from favorable secular trends. As the baby boomer generation ages and the average life expectancy is on the rise, the senior population of the U.S. is expected to grow significantly in the upcoming years. The 80+ age group is expected to grow by about 5% per year on average until 2030.

In addition, this age group has immense spending power, as its average net worth exceeds $640,000. Thanks to these trends, healthcare spending in the U.S. is expected to grow by about 5% per year on average until 2030.

The recent merger with Physicians Realty is a major growth catalyst for the REIT. On March 1, 2024, Healthpeak Properties closed its acquisition of Physicians Realty Trust in an all-stock merger of equals valued at ~$21 billion. The new REIT expects to benefit from much greater scale and annual savings of up to $60 million by the end of next year, without a significant effect on its debt. On March 1, Healthpeak Properties changed its ticker from PEAK to DOC.

The company’s balance sheet is gradually improving. Healthpeak Properties has sold several assets and has used the proceeds to reduce its debt. As a result, the REIT has received credit rating upgrades from S&P and Fitch (to BBB+) as well as Moody’s (to Baa1).

DOC shares currently yield 6.2%.

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At the time of publication, Ciura had no positions in any stocks mentioned.