If you love dividends, and who doesn't, it can be hard to find attractive stocks to buy today. But that doesn't mean you can't; it just means you have to work a little harder to search them out. Here are three high-dividend real estate investment trusts (REITs) that you might want to add to your buy list right now: W.P. Carey (NYSE: WPC), Broadmark Realty Capital (NYSE: BRMK), and LTC Properties (NYSE: LTC).
1. A net lease stalwart
Net lease real estate investment trusts are generally considered a low-risk option because their tenants are responsible for most of the operating costs of the properties they occupy. Add in long leases and, usually, built-in rent escalators, and there's a lot to like about the space. With 24 years' worth of annual dividend increases behind it, W.P. Carey is a leader in the sector (that's every year since its 1998 IPO). Today it offers investors a very generous 6.1% yield.
One of the keys to W.P. Carey's success is its opportunistic approach to acquisitions. It tends to originate its own leases in sale/leaseback transactions, giving it control of terms and deeper insight into its lessees' finances. This gives it the confidence to work with customers lower down the financial strength scale or that may be dealing with some other headwinds (like a pandemic).
And it spreads its bets across multiple sectors so all its eggs aren't in one basket. Today its portfolio contains industrial (24% of rents), warehouse (23%), office (23%), retail (17%), and self-storage (5%) assets, with a fairly broad "other" category (the rest) thrown in, as well. Its portfolio also reaches beyond the United States, with roughly 37% of rents coming from other countries (largely in Europe).
When you put it all together, W.P. Carey offers a unique and high-yield entry into the net lease space. In fact, it basically sailed through the pandemic without material trouble (rent collections never fell below 96%). And with just one year to go until it reaches Dividend Aristocrat status, it's probably the most enticing name on this list.
2. Not your typical mREIT
Normally, mortgage REITs are best avoided by investors looking to live off the dividends their portfolios generate. They are complex, they make heavy use of leverage, and the dividends tend to be highly volatile over time. Broadmark upends that model. For starters, it makes short-term loans directly to builders and gets repaid when projects are completed or sold (this is known as hard money lending). That's pretty simple to grasp. Second, it doesn't have any debt -- so leverage isn't in play at all. And, third, the REIT's goal is a steady, and hopefully growing, dividend over time as it builds the size of its portfolio.
To be fair, Broadmark cut its dividend in 2020. But it wasn't because the model broke; it was because the coronavirus delayed construction projects and, thus, repayments. By the end of the year, its business was getting back to normal and it upped the dividend, which is paid monthly, by 17% in January. That suggests that the REIT's efforts to put additional money to work (it ended the third quarter with $173 million in cash on its balance sheet) are going well.
Broadmark isn't an exciting company, and it never intends to be. But, with a 7.7% yield, I'm sure most dividend investors will be very happy with boring.
3. Think long term
The LTC in LTC Properties stands for "long-term care." That's basically a description of what this healthcare REIT owns, with roughly 55% of its rents coming from nursing homes and the rest largely from assisted living centers. The graying of society is still a huge demographic theme, and older adults simply need more help than younger ones, so the long-term opportunity here remains pretty enticing. Moreover, the REIT focuses on net lease deals, so it hasn't been hurt too badly by the coronavirus pandemic.
But it hasn't gone unscathed, either, as it has had to grant rent concessions to lessees struggling with move-outs (which, sadly, includes deaths), fewer move-ins, and higher operating costs. It's not an ideal operating environment, but LTC Properties is still comfortable with its dividend, which it has held steady throughout the pandemic. In fact, it has already announced its first-quarter dividend will be $0.19 per share per month -- the same level it was throughout 2020.
The really enticing thing here is that people don't go into nursing homes and assisted living centers because they want to; they do it because they need to. So as baby boomers continue to crest into retirement, demand for LTC Properties' facilities will increase. And that should mean a bright future, once the world figures out how to deal with the novel coronavirus. For investors who can stomach a little uncertainty, collecting the REIT's 5.5% yield should be ample compensation for the near-term risks.
Time for some deep dives
If you like big dividends, then this trio of REITs will probably be pretty interesting to you. With a brief background on each, you can now dig in a bit more and figure out if diversified net lease player W.P. Carey, construction loan-focused Broadmark, or senior housing player LTC Properties is right for your portfolio. In the end, you might find that you add more than one of these high yielders to your buy list.