Real estate investment trusts (REITs) are an excellent place for dividend investors to find an enticing income stream. The average REIT currently yields around 4%, more than double the S&P 500. With more than 200 publicly traded REITs, dividend investors have lots of options.
Three high-yielding REITs that stand out as attractive buys this December are Camden Property Trust (NYSE: CPT), Kimco Realty (NYSE: KIM), and Medical Properties Trust (NYSE: MPW). Here's a look at why dividend investors will want to buy them this month.
Focused on the right markets
Residential REIT Camden Property Trust currently yields 3.3%. While that's below the REIT average, it's one of the safest payouts in the sector. One factor driving that view is that the apartment owner boasts one of the industry's best balance sheets, including A-rated credit and a conservative dividend payout ratio.
The REIT also has a highly resilient portfolio, which was on display this year. For example, the company's funds from operations (FFO) declined by less than 3% so far this year, which is quite modest compared to the slumps experienced by larger rivals Equity Residential (NYSE: EQR) and AvalonBay Communities (NYSE: AVB). That's largely because those companies focus on owning apartments in high-cost urban core areas. Meanwhile, Camden has a much more diversified portfolio, including higher exposure to lower-cost markets and suburban areas.
Because of that and its strong balance sheet, Camden's high-yielding payout is on rock-solid ground. Further, it has the financial flexibility to continue expanding its portfolio, which would help grow FFO and enable it to continue increasing its dividend.
Bounced back quickly
Retail REIT Kimco Realty has faced significant headwinds from COVID-19 this year. Rental collection rates at its shopping centers fell off a cliff during the second quarter, which forced the company to suspend its dividend. However, receipts improved in the third quarter, giving the company the confidence to reinstate a dividend. It subsequently increased that payout in the fourth quarter. At the current level, Kimco yields 4.2%.
That might not be the last increase. In declaring its fourth-quarter dividend, Kimco stated that it "expects to establish a more normalized and well-covered dividend level based on our adjusted funds from operations and REIT taxable income in 2021."
Thus, if its rental collection rate continues improving -- it averaged 89% during the third quarter -- the company will have more confidence to pay a higher dividend in 2021. Further supporting that view is Kimco's strong balance sheet, which gives it the flexibility to go shopping for new retail centers that financially strapped rivals could put on the market. Future deals could boost its income, giving it more cash to pay dividends.
Another year of dividend growth seems likely
Healthcare REIT Medical Properties Trust yields 5.4%. That healthy payout is very sustainable. For starters, the hospital owner has collected nearly all the rent it billed this year. On top of that, it has a solid balance sheet and a conservative payout ratio. Those factors give it the financial flexibility to acquire new properties.
The REIT is on track to invest $3 billion on new opportunities this year and could spend around the same amount next year. Those additions will help grow the company's FFO. That would enable it to continue increasing its dividend, which it has done for the last seven straight years.
The bottom line: Excellent income options for 2021 and beyond
Camden Property Trust, Kimco Realty, and Medical Properties Trust all offer investors above-average yields. Even better: Each of those payouts seems likely to head higher in 2021. Because of that, they're great REITs for income-focused investors to put on their December shopping lists.