3 High-Yield REITs to Buy Now
Looking for income? These real estate investment trusts offer high-yields with safe dividends.
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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.
The appeal of REITs is that they provide investors with the opportunity to profit from real estate, without the need to own property.
REITs are required to distribute the vast majority of their taxable income to shareholders, in exchange for a favorable tax status. As a result, investors can find high-dividend yields to be very common among REITs.
Healthy Yield
Omega Healthcare Investors OHI is a healthcare REIT that generates more than 80% of its revenues from skilled nursing facilities, and the remainder of its revenues from senior housing developments.
Omega posted third-quarter earnings on November 2, and results were slightly better than expected. Funds from operations per share came to 63 cents, while revenue was up 1.1% year over year to $242 million. That beat estimates by an impressive $32 million. Funds available for distribution were $174 million, or 68 cents per share, which was largely comparable to $173 million, or 71 cents per share a year ago. The trust noted higher interest income and unexpected rent payments as driving results.
Omega completed $106 million in new investments during the quarter, comprised of $55 million in real estate acquisitions, $26 million in real estate loans, and $24 million in renovation and construction projects.
Omega benefits from some favorable trends. The number of elderly people in need of healthcare is expected to grow at a fast pace over the next decade. In addition, the trend is for increasing healthcare spending in the U.S. Omega will see only a small portion of its leases expire over the next decade. Taking into account these tailwinds, in addition to various headwinds facing the trust, we forecast FFO-per-share growth of 4% in the years to come.
The payout ratio is quite high, but that is typical for a REIT, and the dividend appears secure, provided the company's FFO continues to grow. At this point, we don't see cause for a dividend cut but note that if operator troubles continue, that could change.
Competitive advantages are difficult to come by for REITs, but Omega's focus on long-term care for the elderly is attractive given the number of people that will fall into this group in the coming years.
OHI stock currently yields 8.9%.
Play the Game
Gaming and Leisure Properties, Inc. GLPI is a Pennsylvania real estate investment trust, which was incorporated in February of 2013 as a wholly owned subsidiary of Penn National Gaming. GLP's primary business practice consists of acquiring, financing, and owning property to be leased to gaming operators in triple net lease agreements.
The triple-net structure is attractive because the tenant is responsible for all real estate taxes, building insurance and maintenance. GLP's portfolio spans across 16 states and consists of 46 geographically diverse gaming and related facilities.
On October 27, GLPI reported its financial outcomes for the third quarter ending September 30, 2023. The REIT generated year-over-year growth of 7.7% in total revenue, reaching $359.6 million for Q3 2023, compared to $333.8 million in Q3 2022. However, there was a decrease in net income, standing at $189.3 million for Q3 2023 as opposed to $226.2 million in the same quarter of the previous year. Adjusted EBITDA saw an improvement, climbing to $327.1 million from $308.8 million in Q3 20221.
GLPI is a slow and steady grower given its status as an entertainment triple net lease real estate investment trust. As a result, we expect AFFO per share to grow at a 5.2% CAGR over the next half decade.
GLPI has a dividend payout ratio of approximately 72%.
The shares currently yield 6.2%.
Boston Strong
Boston Properties, Inc. BXP is a self-administered and self-managed REIT that was founded in 1970, and is headquartered in Boston, Mass. It is one of the largest owners, managers, and developers of first-class office properties in the United States and has a significant presence in five major markets: Boston, Los Angeles, New York, San Francisco and Washington, DC.
In the 2023 third quarter, the company saw a revenue increase of 4.3% to $824.3 million compared to the same quarter in 2022. However, BXP reported a net loss of $(111.8) million or $(0.71) per diluted share, primarily due to non-recurrence of gains on sales of real estate, non-cash net losses from investments, increased depreciation, and amortization expenses, and higher interest expenses.
The company's funds from operations (FFO) were $292.8 million, or $1.86 per diluted share, a slight decrease compared to the previous year. The FFO per diluted share, however, exceeded BXP's guidance by $0.02 per share, thanks to better-than-projected portfolio performance.
Future growth will be fueled by property investments. BXP also executed approximately 1.06 million square feet of leases with an average term of 8.2 years and delivered two significant development projects. These include the Net Zero, Carbon Neutral office repositioning at 140 Kendrick Street in Massachusetts, and a 231,000 square foot laboratory/life sciences property in South San Francisco, Calif.
Its focus on newly developed Class A office properties in supply-constrained cities, Boston Properties attracts and retains top-tier tenants, driving a long-term uptrend in FFO per share. A growth tailwind is that there is plenty of room for income improvement. Additionally, Boston Properties' fastest growing business segment is its development management unit, which provides the trust with a high return on invested capital.
BXP stock yields 5.6%.
At the time of publication, Ciura had no positions in any securities mentioned.