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3 High Yielding REITs for Safe Dividend Income


Real estate investment trusts, or REITs, are generally a great place to turn to safe and attractive dividend income. This is because they benefit from zero corporate taxes and are required by law to pay at least 90% of their taxable income as dividends to their shareholders. Furthermore, the majority of REITs benefit from the defensive and stable nature of rental income under real estate contracts.

It is therefore not surprising that many blue-chip REITs that have been around for decades have now joined the ranks of some of the world’s most elite dividend growth companies as Dividend Aristocrats (increase in dividends). dividend growth over 25 consecutive years) and/or Dividend King (More than 50 consecutive years of dividend growth).

Here, we’ll look at three high-yielding REITs that offer secure dividends and are either Dividend King or Dividend Aristocrat.

A young noble in ‘Move In’ status

Essex Asset Trust (ESS) joined the Dividend Nobles club quite recently as it has increased its dividend for 28 consecutive years. With a very attractive long-term growth outlook, excellent balance sheet and moderate payout ratio, we expect the company to continue to increase its dividend for many years to come.

Its business model consists primarily of the development, redevelopment, management, acquisition and sale of West Coast multi-family condominium communities. It currently owns more than 60,000 apartments spread across hundreds of communities.

It has three main competitive advantages that generate alpha from this business model.

It can first develop multi-family properties and then sell them for a substantial profit. Second, it can leverage its expertise and business network to purchase assets and then engage in value-added redevelopment activities that offer very attractive risk-adjusted returns for investors. shareholder. Third, its geographic focus means it operates in supply-constrained markets with solid economic foundations. As a result, there is little threat of oversupply flooding the market, which means its assets have a solid moat around them. With tech-driven job growth in its markets and limited supply coupled with its potential for growth and redevelopment, ESS has a bright future.

ESS has also proven to be resistant to recessions by providing basic necessities, making its cash flow and dividend growth profile even more promising in our case. face a severe recession in the near future. For example, if cash from operations (FFO) per share actually increased during the last recession, from $5.57 in 2007 to $6.14 in 2008 and then $6.74 in 2009 .

When combining competitive advantage and low risk profile with 4% dividend yield and 5-6% expected FFO and dividend CAGR per share over the next half decade, ESS delivers a Very attractive risk-reward for investors looking for safe high returns.

Legend of ‘O’

Income from real estate (Umbrella) is a legendary dividend growth stock that has outperformed the total return of the S&P 500 since it went public in 1994 and pays an attractive monthly dividend that it has grown over the past year. 27 years in a row.

It is massive in size, with a portfolio of 11,733 properties leased on conservatively structured triple net leases to 1,147 tenants. O has an average lease term of 8.8 years and generates 43% of rental income from investment grade tenants, giving the company high visibility into future cash flows. This cash flow has also proven to perform very well during recessions, further strengthening its record.

With credit rating A-, weighted average maturity of 6.3 years to maturity for bonds and bonds, fixed fee payment ratio of 5.5x, 95% debt unsecured, 88% fixed-rate debt, more than $2.5 billion in liquidity, and 5.2x annualized adjusted net debt to EBITDA, balance sheet O’s math is like a fortress.

O stock offers an attractive 4.5% dividend yield, is very safe, and is likely to continue to grow for many years to come thanks to its strong business model and track record. O also trades at a substantial discount to its historical average on an EV/EBITDA, P/AFFO and P/NAV basis. Combined with the expected continued single-digit average annual AFFO growth per share and a 4.5% dividend yield, this creates a adjusted gross return profile. attractive risk-adjusted.

Create a federal case from this REIT

Finally, the Federal Real Estate Trust (FRT) is a leading retail-focused REIT that owns, develops, and re-develop shopping centers in the densely populated, high-income coastal markets in the United States. .

With more than 3,100 tenants in more than 105 properties and none of the tenants providing even 3% of the annual base rent, FRT is well protected from retail bankruptcies that can develop as e-commerce The economy continues to grow and potential future recessions will take its toll on retailers and their landlords.

In addition to focusing on markets with favorable income and demographic trends, FRT also creates value for shareholders by leveraging its strong A-level balance sheet to invest in assets. existing assets and new assets with attractive rates of return. In addition to driving rental income growth, these investments also keep the company’s assets fresh and attractive to tenants and shoppers, further strengthening their competitive position.

While certainly not recession-proof, the FRT has performed quite well during the last major recession and will likely do so in the next thanks to diversification, market strength, and so on. as well as the quality of tenants and properties. During the last major recession, its FFO per share rose 6.4% year over year in 2008, fell 8.8% in 2009 and then increased 10.5% in 2010. As a result, we believe in its continuation. long-term dividend growth chain.

bottom line

With economic uncertainty so high, safe investments and attractive returns are more valuable than ever to investors. With proven high yielding REITs and attractive valuations like ESS, O and FRT, investors have access to some of the best real estate portfolios, management teams and business models. the world will continue to generate an ever-increasing source of income for many people. to the years.

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