Real estate investment trusts (REITs) make great income stocks because they're required by law to distribute 90% of their taxable income to investors each year. Because of that, most pay dividends with above-average yields. Currently, the average REIT yields 3.56%, which is more than double the 1.4% yield for stocks in the S&P 500.
Many REITs pay even higher dividend yields. Three high-yielders that look like attractive buys this May for investors are Medical Properties Trust (NYSE: MPW), STAG Industrial (NYSE: STAG), and W.P. Carey (NYSE: WPC).
A healthy payout
Healthcare REIT Medical Properties Trust currently yields 5%. It supports that payout with the steady cash flow generated by its hospital properties, which it leases to operators under triple net leases. Despite its properties being ground zero for a raging pandemic, the REIT didn't have any trouble collecting rent last year.
Instead, 2020 was a banner year for the company, as it closed nearly $3.6 billion of new investments, which helped grow its normalized FFO per share by 21%. Meanwhile, Medical Properties Trust has gotten 2021 off to an excellent start, as it's secured more than $1 billion of additional investments. That recently gave it the confidence to increase its dividend for the eighth straight year.
With a solid balance sheet, reasonable payout ratio, and access to capital, Medical Properties has the funding to keep acquiring hospital properties, implying that it should have no problem continuing to grow its attractive dividend in the coming years.
Lots of room to grow
STAG Industrial currently yields 4%. The industrial REIT supports that payout with a diversified portfolio of warehouses, light manufacturing facilities, and flex/office space. These properties are essential to their tenants, enabling STAG to collect nearly all the rent it billed last year.
The company steadily expands its portfolio via acquisitions. It expects to purchase $800 million to $1.2 billion of properties per year over the next five years. It will often buy value-add properties and leverage its extensive leasing and redevelopment expertise to create additional shareholder value.
This acquisition strategy has enabled the company to steadily grow its dividend. That trend should continue in the coming years, given the REIT's plan to pour billions of dollars into expanding its portfolio over the next five years.
A steady grower
W.P. Carey currently yields 5.5%. The diversified REIT supports that payout by owning a wide range of mission-critical properties. Nearly half its portfolios are warehouses and other industrial buildings. In addition to those properties, it also owns offices, retail properties, self-storage facilities, and other properties triple net leased to operating tenants. Because the REIT focuses on owning mission-critical real estate, it routinely collects a high percentage of its rent.
W.P. Carey steadily expands its portfolio via acquisition. It made $825.9 million of investments last year and should purchase another $1 billion to $1.5 billion of properties this year. Those additions should enable W.P. Carey to continue growing its dividend, which it's done every year since going public in 1998.
Great REITs for yield-seeking investors
Medical Properties Trust, STAG Industrial, and W.P. Carey all pay attractive dividends that yield more than 4%. Even better: All three have a long history of growing their payouts, which should continue for the foreseeable future. That income with upside makes them great high-yield REITs to consider adding to your portfolio this May to boost your income stream.