income-producing real estate. To qualify as a REIT, the trust must comply with IRS rules. These rules include: 1) distributing annually as dividends at least 90% of its taxable income, 2) investing at least 75% of its total assets in real estate and 3) deriving at least 75% of gross income from real estate.
The 90% distribution requirement along with no corporate income taxes are two reasons REITs yields are often above average. However, it is important to note that since REITs pay no income tax, their dividends are not eligible for the special treatment as a "qualified dividends", which are normally taxed at 15%.
When comparing REIT yields to investments with qualified dividends, you must always look at them on an after-tax basis. REITs trade on major stock exchanges and have become immensely popular since their introduction.
This week, I screened my dividend growth stocks database for REITs with a yield at or above 5% and have increased their dividends for at least 10 consecutive years. The results are presented below:
Urstadt Biddle Properties (UBA) is a real estate investment trust that acquires, owns and manages commercial real estate properties primarily in the northeastern United States. The company has paid a cash dividend to shareholders every year since 1969 and has increased its dividend payments for 21 consecutive years. Yield: 5.1%
National Health Investors (NHI) is a real estate investment trust that invests in income-producing health care properties primarily in the long-term care industry. The company has paid a cash dividend to shareholders every year since 2002 and has increased its dividend payments for 15 consecutive years. Yield: 5.1%
Digital Realty Trust, Inc. (DLR), a real estate investment trust (REIT), that owns, acquires, repositions and manages technology-related real estate. The company has paid a cash dividend to shareholders every year since 2005 and has increased its dividend payments for 12 consecutive years. Yield: 5.1%
Universal Health Realty Income Trust (UHT) is a real estate investment trust (REIT) that invests in healthcare and human service related facilities. The company has paid a cash dividend to shareholders every year since 1987 and has increased its dividend payments for 28 consecutive years. Yield: 5.3%
Health Care Property Investors, Inc. (HCP) is a California based equity-oriented real estate investment trust that has direct or joint venture investments in health care-related facilities across the U.S. The company has paid a cash dividend to shareholders every year since 1985 and has increased its dividend payments for 30 consecutive years. Yield: 5.8%
W. P. Carey Inc. (WPC) is an investment firm that provides long-term sale-leaseback and build-to-suit transactions for companies worldwide. The company has paid a cash dividend to shareholders every year since 1998 and has increased its dividend payments for 16 consecutive years. Yield: 6.0%
Omega Healthcare Investors Inc. (OHI) is a real estate investment trust (REIT) that invests in income-producing healthcare facilities, mainly long-term care facilities located in the United States. OHI is and a member of the Broad Dividend Achievers™ Index. Yield: 6.0%
As with past screens, the data presented above is in its raw form. Some of the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 250+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: Long UHT, HCP, in my Dividend Growth Portfolio, long UBA, NHI, DLR, OHI in my high-Yield Portfolio, See a list of all my dividend growth holdings here.
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