The primary draw of real estate investment trusts (REITs) is their above-average dividends. Because REITs must distribute 90% of their taxable net income to remain in compliance with IRS regulations, they often pay high dividend yields. Currently, the sector's average is over 3%, more than double that of stocks in the S&P 500.
However, some REITs offer even bigger payouts. Three that should appeal to yield-seeking investors this June are SL Green Realty (NYSE: SLG), STAG Industrial (NYSE: STAG), and Medical Properties Trust (NYSE: MPW).
A sky-high yield
SL Green Realty is Manhattan's largest office landlord, owning many of the properties that dot the city's iconic skyline. The office REIT leases space in its skyscrapers to top-notch tenants in the financial services, technology, advertising, media, and legal sectors. They're willing to pay a premium price for high-quality space in one of the world's top metro areas.
While the pandemic hit that city hard, forcing most companies to work remotely, these companies are starting to repopulate their offices as vaccines roll out. That should provide a boost to SL Green as it should benefit from a return of nonrental income sources like parking fees and improved rental collection rates from retail tenants in its buildings. Those factors will provide further support for the company's rock-solid 4.6%-yielding monthly dividend.
Meanwhile, that payout has the potential to keep heading higher in the future -- SL Green has increased it in each of the last 10 years -- as it completes future development projects. It's investing more than $6 billion across four major construction projects, including the recently opened skyline-defining One Vanderbilt tower that's already more than 80% leased.
Buying its way to an even bigger dividend
STAG Industrial is an industrial REIT, diversified across the entire industrial real estate sector, including warehouses, light manufacturing buildings, and flex/office properties. The company's portfolio generates stable income that supports its 4.1%-yielding monthly dividend.
This portfolio held up very well during the pandemic, as STAG collected nearly all the rent it billed. That gave the REIT the freedom to continue acquiring properties that helped grow its cash flow and dividend.
The company estimates that it can acquire between $800 million to $1.2 billion of industrial properties annually over the next five years. That should enable it to continue growing its cash flow and monthly income stream.
Healthy dividend growth
Medical Properties Trust is a healthcare REIT focused on owning hospital real estate. While those facilities were ground zero for the pandemic, its portfolio held up exceptionally well, as it collected nearly all the rent it billed. That gave the REIT the cash to continue paying its 5.3%-yielding dividend.
Instead of being a headwind, the pandemic has been a tailwind for Medical Properties Trust. Hospital operators were increasingly willing to sell their real estate, giving them the cash to expand their operations. That enabled the company to close almost $3.6 billion of new investments last year and another $1.6 billion so far in 2021. That spending spree helped fuel double-digit growth in the REIT's normalized FFO per share over the past year.
It also enabled the REIT to increase its dividend for the eighth straight year. Overall, it has grown its payout at a 5% compound annual rate during that time frame. That growth seems likely to continue, since Medical Properties has a rock-solid financial profile and a massive acquisition opportunity set to continue acquiring hospitals.
High-quality, high-yielding REITs
Most REITs pay high-yielding dividends compared to the average stock. However, SL Green, STAG Industrial, and Medical Properties stand out in the sector. Not only do they offer even higher yields than most REITs, but this trio also expects to continue growing those attractive payouts in the future. That combination makes them ideal options for yield-seeking investors to buy this June.