Real estate investment trusts (REITs) are entrusted with investor money to return a yield in the form of reliable dividend payouts. After all, they’re required to distribute at least 90% of their taxable income that way.
But how much they pay varies widely, and the COVID-19 pandemic has wreaked havoc on many portfolios, especially in the hospitality and retail sectors.
But there are still attractive candidates out there for investment dollars plunked down in expectations of good returns commensurate with reasonable risk.
While residential mortgage REITS (mREITS) tend to have the higher yields, they also could be particularly vulnerable to any interest rate hikes coming our way if inflation heats up. There are instead some good candidates to consider that make their money in different ways.
Three to consider here are Apollo Commercial Real Estate Finance (NYSE: ARI), Gladstone Commercial (NASDAQ: GOOD), and National Health Investors (NYSE: NHI).
Here’s a bit more on each.
Apollo Commercial Real Estate Finance
New York City-based Apollo Commercial Real Estate Finance primarily makes and invests in mezzanine loans, senior mortgages, and other debt collateralized by commercial real estate (CRE) in the United States and Europe.
Apollo is heavily committed to its hometown market, with 35% of its CRE portfolio of $6.82 billion backed by Big Apple properties. About 31% is evenly distributed across the rest of the country, while 34% is in Europe, and 22% of that in Great Britain.
As for property type, office at 26% is the largest, followed by leisure properties at 15% and then a mix of urban retail, healthcare, residential, industrial, and more.
Apollo stock closed on May 28 at $15.65 a share, just below the 52-week high of $15.70 it had reached earlier that day and nearly double its 52-week low of $8.04 it dipped to on June 1, 2020. After paying $0.46 per share quarterly from 2016 through 2018, the company did cut its dividend and has been paying $0.35 per share for the past four quarters, during a pandemic that hit retail properties quite hard. That’s still good for a yield of 8.95% based on an annual dividend of $1.40 per share.
Gladstone Commercial is a McLean, Virginia-based investor in single-tenant and anchored multi-tenant properties that at the end of the first quarter owned 120 office and industrial properties in 27 states.
It’s also a sister company to Gladstone Capital, Gladstone Investment, and another REIT, farmland investor Gladstone Land.
Gladstone pays its dividends monthly and says it has not missed or reduced a cash distribution since it went public in 2003.
Gladstone stock closed on May 28 at $21.67 a share, just a couple pennies below the 52-week high of $21.69 it had reached earlier that day and about 50% up from its 52-week low of $15.78 notched on Oct. 29. That gave it a market cap of $788.7 million and a yield of 6.93% based on an annual dividend of $1.50 per share.
National Health Investors
National Health Investors is based in Murfreesboro, Tennessee, and invests in the continuum of independent, assisted, memory care, and skilled nursing facilities, as well as entrance-fee communities, specialty hospitals, and other medical office buildings.
Since its founding in 1991, this healthcare REIT has grown its portfolio to 242 properties managed by 36 operating partners in 34 states. It’s also still paying its shareholders well despite the trauma of the pandemic on senior living facilities that has forced NHI and its competitors to work with its operators on rent breaks and other concessions.
NHI stock closed on May 28 at $65.91 per share, 16.1% off its March 15 52-week high of $78.56 and significantly recovered from its 52-week low of $53.70 last Oct. 29. That gave it a market cap of $3.0 billion and a yield of 6.69% based on an annual yield of $4.41 per share. NHI also has grown its dividend an average of 5.09% a year for the past 11 years, a notable record that includes no dividend reductions during the pandemic.
The Millionacres bottom line
Each of these three REITs have a history of producing handsome yields and are in different industries, and they’ve each weathered the pandemic reasonably well. Any combination of them would add diversity and income performance to the buy-and-hold segment of your portfolio.