Real estate stocks, especially real estate investment trusts (REITs), are known for their above-average dividends. The Vanguard S&P 500 ETF (NYSE: VOO) has a dividend yield of just 1.3% as of Sept. 7, while the Vanguard Real Estate ETF (NYSEMKT: VNQ), which tracks an index of property-owning REITs, yields a much more attractive 2.9%.
However, keep in mind that this is just an average. There are some REITs that pay significantly more. In fact, there are some excellent real estate stocks that have dividend yields of 5% or higher and have significant growth potential in the years ahead. Here are three in particular that you might want to put on your radar.
The ultimate reopening stock?
EPR Properties (NYSE: EPR) was forced to suspend its dividend as the COVID-19 pandemic started, and it's easy to understand why. The REIT invests in a portfolio of experiential properties, such as movie theaters, ski resorts, golf attractions, and indoor water parks. Virtually all were closed for at least some of 2020, and the movie theater business still isn't quite back to pre-pandemic levels of business.
However, the business has rebounded significantly, and the financial health of top tenant AMC Entertainment (NYSE: AMC) has improved to the point where EPR felt comfortable reinstating its dividend sooner than expected. The company pays monthly dividends and currently yields about 5.8%.
It's also important to note that EPR Properties didn't only reinstate its dividend; the company also plans to get back to growth mode. EPR has more than $1.5 billion in liquidity, a ton for a company with a $3.8 billion market cap, and sees a $100 billion investable universe of properties to pursue. With shares still considerably below their pre-pandemic highs, this could be an excellent value play for patient long-term investors with a relatively high risk tolerance.
An under-the-radar data center REIT with a 5% yield
Iron Mountain's (NYSE: IRM) core businesses might not sound too exciting: The company owns 1,450 facilities that are primarily used to store physical records. Although 95% of the Fortune 500 relies on Iron Mountain for storage needs, the reality is that this is a business that is almost certain to decline over time. The company also has its service business (like the mobile document shredding trucks you may have seen), but this isn't likely to be a massive growth driver either.
On the other hand, Iron Mountain is quietly getting into the data center business, and this is a move that investors should definitely pay attention to. Iron Mountain's brand name is synonymous with records security, so why not leverage that and participate in the digital transformation?
So far, Iron Mountain has 15 operating data centers that make up about 7% of the company's total revenue, but if Iron Mountain can continue to successfully scale this part of its business, it could be a major long-tailed growth driver.
A long-tailed growth opportunity
With the rapidly aging Baby Boomer generation causing the older age groups of the population to expand, there will be a long-tailed surge in healthcare demand in the United States for the next few decades. Income-seeking investors who want to get a piece of the action should take a look at Medical Properties Trust (NYSE: MPW), a hospital REIT with a 5.2% dividend yield.
Medical Properties Trust owns about 440 properties, most of which are located in the United States or Europe. And it's important to note that this is a market that is still in the relatively early stages of REIT consolidation. In the United States, REITs own more than half of the hotel and mall properties, just to name a few examples, but less than 15% of healthcare properties are REIT-owned, which creates a tremendous amount of expansion opportunities going forward.
Income and growth can be a winning long-term combination
As mentioned, not only do these real estate stocks have high payouts, but they all have lots of room to grow their businesses. With the potential to produce market-beating total returns over the long run, these three high-income REITs could be worth a closer look for investors of all ages.