In uncertain times, investors often turn to income-producing stocks. While it’s hard to pass up the opportunity for substantial appreciation that non-dividend stocks provide, the trade-off for income stocks is reduced downside risk, as well as a regular monthly or quarterly dividend.
But finding high-yielding stocks without unsustainable payout ratios, dividend cut risk or weak earnings can be difficult. That’s where Real Estate Investment Trust (REIT) stocks can have an advantage. Because they are required to pay shareholders 90% of their taxable income, yields tend to be higher than dividend stocks in other sectors.
These three REIT stocks with dividends of 5% or more could be good bets for providing stability and income through good times and bad.
Related: This little-known REIT has produced double-digit annual returns for the past five years
Omega Healthcare Investors Inc. (NYSE: OHI) is a long-term healthcare industry REIT, with 63 owned assisted living and skilled nursing facilities throughout the US and UK
Most of its properties are triple net leased, meaning tenants pay the common costs of the property, such as taxes, insurance and maintenance. This feature is an advantage in times of inflation, such as that of 2022.
Unfortunately, the $2.68 annual dividend hasn’t grown much over the past five years. At the same time, it has never been cut, even in the worst period of the pandemic. OHI stock is up about 9% over the past 52 weeks, on top of its current dividend yield of 8%.
Investors have expressed concern about the adjusted funds from operations (AFFO)/dividend ratio of 88%, and even more so for the FFO/dividend ratio above 100%. These numbers will need to improve if OHI is to avoid a dividend cut in the future. The nursing home industry is not without problems, as demonstrated during COVID-19. Inflation is also a negative factor. However, with an aging population, OHI appears well-positioned for future growth and somewhat recession-proof.
STORE Capital Corp. (NYSE: STOR) is a REIT that acquires and manages single-tenant operating properties. STOR’s portfolio includes over 2,500 retail and industrial properties in the US. Its tenants are well-diversified in more than 120 industries, reducing the risk of rental defaults due to a recession. STOR leases its properties to medium and large companies on long-term contracts.
STOR is constantly looking for new acquisitions, but has also sold profitable assets on a regular basis. In 2022, the company sold 24 properties, representing nearly $20 million in profits. Second quarter AFFO was $0.58 per share, up 16.5% year over year, easily covering the quarterly dividend of $0.385. With the exception of 2020, both revenue and earnings per share (EPS) have been growing steadily over the past five years. Over the same time period, STOR has rewarded shareholders by increasing its dividend by 24%.
Although the stock fell more than 30% from November 2021 to June 2022, it has recovered well since then and is up about 15% in the past two months.
With a current dividend yield of 5.65% and improved metrics, STOR could be a strong investment opportunity.
Arbor Realty Trust (NYSE: ABR) is a real estate REIT that invests in residential and commercial real estate markets in the U.S. The Long Island-based company invests in bridge and mezzanine loans for multifamily and commercial real estate.
Like STOR, the diversified nature of ABR’s clients and loan products offers some protection against downside risk. While ABR may be more volatile than you’d like to see in an income-producing stock, it has more than tripled from the 2020 COVID-19 lows.
Over the past 52 weeks, ABR stock is down about 6%, but is still profitable when considering its 10.30% dividend yield.
ABR suffered a 30% decline between May and July 2022, but has risen about 24% since then. The current dividend of $1.56 is well covered by 12-month FFO of $2.46.
Ford Equity recently upgraded ABR from 3 to 2. If you can handle a little volatility, you might consider adding ABR to your portfolio.
Related News Real Estate Investing Highlights
The real estate investment platform backed by Bezos Homes arrived launched a new batch of offers to allow retail investors to buy shares in single-family rental homes with a minimum investment of $100. The platform has already financed over 150 properties with a total value of over $50 million.
Vacation rental investment platform Here is getting ready to launch new real estate listing in San Diego with a minimum investment of $100. The company says vacation rentals generate up to 160% more revenue on average than traditional long-term rentals, according to data from Zillow and AirDNA.
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