Most real estate investment trusts (REITs) offer high dividend yields. The average REIT currently clocks in right around 3%, which is more than double the S&P 500's 1.3% dividend yield. That makes it a great pace for income-seeking investors to find an attractive dividend.
Several REITs currently yield well above the sector's average. Three of those higher-yielding REITs that stand out as attractive buys this August are EPR Properties (NYSE: EPR), Realty Income (NYSE: O), and W.P. Carey (NYSE: WPC).
Benefiting from getting back to normal
Specialty REIT EPR Properties recently reinstated its monthly dividend and currently yields 5.9%. The company, which focuses on owning experiential real estate, like movie theaters, eat & play venues, ski lodges, and other attractions, faced significant headwinds during the pandemic. Many of its tenants had to close their doors, which impacted their ability to generate revenue. Because of that, many didn't pay their rent.
However, nearly all the REIT's tenants had reopened by the second quarter of this year. As a result, rent collection improved to 85% in the period. Further, the company collected nearly $50 million of deferred rent and interest in the period. Because of that, it was able to reinstate a dividend.
While EPR still faces some uncertainty as COVID cases surge again across the U.S., the company is in a strong financial position. It had more than $500 million of cash on its balance sheet at the end of the second quarter and an undrawn $1 billion credit facility. That gives it lots of flexibility to take advantage of the current market environment to make acquisitions that enable it to grow its dividend in the future.
One of the best REIT dividends around
Realty Income currently yields right around 4%. The retail REIT has an exceptional dividend track record. It has paid 613 consecutive monthly dividends, growing its payout in 95 straight quarters. That long-term trend isn't likely to stop anytime soon.
Several factors drive that view. First, while the REIT focuses on retail properties -- which have been hard hit by the pandemic -- it concentrates on essential retailers like drug stores, convenience stores, grocery stores, and dollar stores. These stores not only held up well during the pandemic but are also less likely to face disruption from e-commerce. In addition, Realty Income boasts one of the best balance sheets in the REIT sector.
Meanwhile, it's in the process of completing a transformational merger with VEREIT (NYSE: VER) that will create a $50 billion industry behemoth. The combination will boost the company's AFFO per share by 10% even after factoring in the planned spin-off of their combined office properties. That will give it even more room to grow its dividend in the future.
Steady growth ahead
W.P. Carey also has an excellent dividend track record. The diversified REIT -- which yields 5.2% -- has increased its payout every year since its initial public offering in 1998. That steady growth seems likely to continue.
Driving that view is W.P. Carey's solid financial profile, which gives it the financial flexibility to continue acquiring cash-flowing commercial real estate. The REIT has already purchased about $900 million of properties this year, putting it well on its way towards its goal of making $1.25 billion to $1.75 billion of new investments. The company has been increasingly focused on industrial real estate, which is in high demand due to the accelerating growth of e-commerce. That should keep its dividend on a growth trajectory.
Great options for yield-seeking investors this month
REITs are a great place for income-focused investors because they need to pay dividends to maintain their specialized tax status. Three of the more attractive options this month are EPR Properties, Realty Income, and W.P. Carey. All three offer yields over 4% with upside potential due to their growth prospects, making them attractive buys this August.