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Top Dividend REITs

Investors that are looking to dive into the world of real estate have a few burdens that they need to conquer before acquiring property. Typically, the cash flow that is required to buy a property and maintain it can be a considerable challenge for the typical investor. A great alternative to investing in real estate is through a real estate investment trust (REIT). Real estate investment trusts have a very straightforward business model: acquire commercial properties and lend them out to tenants for long periods. One thing that should be noted is that REITs are required to distribute at least 90% of their taxable income back to the shareholders annually. Historically speaking, REITS have attracted many investors across the board due to their steady returns and prudent diversification to the investor’s portfolio.

In the age of COVID-19, there was much uncertainty amongst real estate investors as to what the future will hold for commercial and residential real estate. So far, we have seen that retail real estate prices have stayed relatively stable, and residential prices have fluctuated based on the area as more corporate giants are allowing workers to go fully remote. Below we tried to analyze REITS that support economic sectors that, regardless of economic conditions, would be in demand such as: grocery-anchored strips, data centers, towers, and self-storages.

Grocery-Anchored REIT

Brixmor Property Group is one of the leading REITS in the grocery-anchored sector. They are the largest open-air retail landlord in the U.S. with 400 shopping centers. 70% of their portfolio is centered around grocery-anchored brands within local communities across the United States. Close in proximity to households, and these retail centers serve as the last mile distribution centers for the supply chain. Their top 5 retail tenants are: TJ MAXX, Kroger, Dollar Tree, Burlington, and Publix, combined they lease out 317 stores. Brixmor is well aware of how vital brick and mortar stores are for a community, even with the everlasting changing consumer behavior, Brixmor is adapting their real estate trust to cater to the consumers. Retail brands such as K-mart, Sears, Gamestop, and Office Depot have been slowly closing as the online competitors have been quickly gaining more of the market share, hence Brixmor is reducing their exposure to such brands. It is essential  to replace these dying retail stores with stores that are still in demand by shoppers. As a result, Brixmor has increased its exposure to TJ MAXX, Aldi, Starbuck Coffee, and Ross.  

Portfolio Quick Facts
Portfolio Quick Facts

Focusing their retail centers in some of the most significant metropolitan areas of the United States like New York, Philadelphia, Houston, Dallas, and Chicago, their business model is focused in areas that always have a new influx of people moving into. With an annual dividend yield of 9.04% and a yearly dividend of 1.14 that’s paid quarterly, Brixmor Property Group is a top contender for a value stock that is a leader in a specialized niche of our economy.

BRX Stock Price History
BRX Stock Price History

Datacenter REIT

Datacenters are one of the most critical infrastructures in our society. With the recent change in the cloud and infrastructure, data centers have become crucial for all corporations to secure their operations and streamline their data across their platforms. Digital Realty Trust specialized in building the infrastructure for data centers and maintaining them. One of the significant advantages of data centers is that companies rent space in the cloud unless a company has its proprietary cloud service, they have to lease space in the cloud from a company like Digital Realty. Globally, Digital Realty has over 280 datacenters in 45 metropolitan areas and a total occupancy of 86%. As the digital world is growing at unprecedented rates, Digital Realty is set to invest over 2 billion dollars in the development of data centers, with 59% of these data centers being pre-leased

In the second quarter of 2020, Digital Realty saw 124 new companies joining their datacenter with many companies concentrating on cloud service, IT, network, and content domains.

Exposure By Revenue
Exposure By Revenue

Digital Realty Trust boasts a dividend yield of 2.86%, with an annual dividend of $4.32. Datacenters will be the powerhouse of many upcoming companies as the need for fast and reliable data is crucial in retaining customers and improving services.

DLR Stock Price History
DLR Stock Price History

Towers REIT

Towers for wireless carriers are a very sought-after commodity. Bank of America estimates that the demand for mobile demand usage is growing 30-40% per year. The evolution of 5G and increased cell phone usage throughout the years has put a strain on wireless networks as they try to reach every corner of American society. Crown Castle is a REIT that specializes in the development and implementation of towers, small cells, and fiber all across America. They currently operate more than 40,000 towers and have around 80,000 miles of fiber laid out. One of the unique features the Crown Castle uses is that average citizens can partner up with Crown Castle for them to build towers or small cell carriers onto anyone’s property.

Tower and Small Cells Business Model Comparison
Tower and Small Cells Business Model Comparison

Crown Castle currently has a dividend yield of 2.95%  with an annual dividend of $4.80. They’ve increased their dividend year after year since 2015.

CCI stock price history
CCI stock price history

Self-Storage REIT

Self-storage facilities are recession resilient businesses that have done well through many recessions. As families move and grow, self-storage spaces are always in demand as they house many items that a family might not necessarily need in a short notice. Extra Space Storage ( NYSE: EXR), is a self-storage REIT that has done phenomenal through the COVID-19 crisis. With 1,878 locations, they have been able to keep all these locations open during the crisis, and store occupancy rates are still at historic levels. In addition to building and maintaining its storage facilities, Extra Space Storage is also a property management company for other storage solutions. Currently, they operate in 951 stores as property management, which ranks them as the largest self-storage management company in the United States. 

Extra Space Storage currently has a dividend yield of 3.52% and an annual dividend of $3.60. Their 5-year dividend growth rate is 9.42%.

EXR Dividend Payment History
EXR Dividend Payment History
EXR Stock Price History
EXR Stock Price History

Conclusion

Real estate investment trusts are great pathways to investing in the infrastructure of the United States. When choosing a REIT, one of the most important aspects is looking for niches in our society that will be in demand as time progresses. Data Centers, for example, is one of the niches that technology advanced and now is extremely in demand. When choosing a REIT, there are many different criterias, but focusing on what society demands and what REIT can fulfill that demand is very important as the real estate market is a high competition sector. 

Written by: Armand Bogdan
Published on: Saturday, August 22, 2020 4:00 PM

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