Monday, June 11, 2018

6 High-Yield REITs With Growing Dividends

U.S. REITs were created in 1960 by Congress as a way for all investors to have access to large-scale, 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:

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 18 consecutive years. Yield: 5.4%

LTC Properties Inc. (LTC) is a health care REIT that invests primarily in long-term care and other health care related properties through mortgage loans, property lease transactions, and other investments. The company has paid a cash dividend to shareholders every year since 1961 and has increased its dividend payments for 0 consecutive years. Yield: 5.5%

W. P. Carey Inc. (WPC) is a leading global net-lease REIT that provides long-term sale-leaseback and build-to-suit financing solutions for companies worldwide. The company has paid a cash dividend to shareholders every year since 1998 and has increased its dividend payments for 19 consecutive years. Yield: 6.0%

Welltower Inc. (WELL) is a real estate investment trust that invests in health care facilities, including senior housing and specialty care, and medical office buildings. The company has paid a cash dividend to shareholders every year since 1971 and has increased its dividend payments for 0 consecutive years. Yield: 6.1%

Tanger Factory Outlet Centers (SKT) is a self-administered and self-managed real estate investment trust that develops, acquires, owns, operates and manages factory outlet shopping centers in the United States. The company has paid a cash dividend to shareholders every year since 1993 and has increased its dividend payments for 24 consecutive years. Yield: 6.4%

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.

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 200+ 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 NHI, OHI in my High-Yield Portfolio. See a list of all my Dividend Growth Portfolio holdings here.

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