With asset values surging due to low interest rates, it's getting harder to find an attractive yield. Even yields on real estate investment trusts (REITs) are falling as their stock prices rise. The average REIT now yields less than 3% following this year's nearly 30% rally in the sector. However, that's still more than double the yield of the S&P 500.
On the bright side, there are still a few REITs that stand out for yield-seeking investors. EPR Properties (NYSE: EPR), Medical Properties Trust (NYSE: MPW), and SL Green Realty (NYSE: SLG) all currently yield more than 5%. Add in their upside potential, and they're appealing REITs for investors desiring a bit more income these days.
Back in action
EPR Properties is a specialty REIT focused on owning experiential real estate, like movie theaters, eat and play venues, and other attractions. The pandemic had an outsized impact on these properties, causing many of the company's tenants to fall behind on their rent. That forced EPR Properties to suspend its dividend last year.
However, with vaccines rolling out, allowing for some return to normalcy, people are enjoying these experiences once again. As a result, EPR's rental collection rate improved to 85% during the second quarter. Further, it collected a significant portion of the rent it deferred to help tenants through the pandemic. That allowed the company to reinstate its monthly dividend, which currently yields 5.9%.
EPR also has more than $500 million of cash on hand and an undrawn $1 billion credit facility. That gives it ample financial flexibility to expand its portfolio. While it plans to reduce its exposure to the movie theater sector in the future, it aims to grow its portfolio by acquiring ski, gaming, cultural, and experiential lodging properties. Those future additions should provide additional support to its high-yielding dividend and give it room to grow.
Medical Properties Trust is a healthcare REIT focused on owning hospitals. These facilities have been vital in battling the pandemic. Because of that, Medical Properties has thrived, collecting nearly all the rent it has billed in the past year. Further, hospital operators are realizing that while their properties are critical, it's not essential that they own this real estate. That's allowing Medical Properties Trust to accelerate its investment activity level.
The company closed nearly $3.6 billion of investments last year and has already secured more than $3.6 billion of transactions this year. That's fueling double-digit AFFO (adjusted funds from operations) growth and has also allowed the REIT to continue growing its dividend. It has now increased the payout for eight consecutive years, helping push its yield to more than 5.1%.
Meanwhile, the company recently secured a joint venture valuing eight Massachusetts hospitals at $1.78 billion, 48% more than the REIT paid for those facilities in 2016. That's giving it the financial flexibility to fund new acquisitions so it can continue growing its portfolio, AFFO, and dividend.
Standing tall amid the uncertainty
SL Green is an office REIT focused on New York City. While the company has faced some pandemic-related headwinds, it's fairing well despite the ongoing uncertainty regarding when companies will make a full return to their offices.
That eventuality seems inevitable, given SL Green's leasing volume. The company signed leases covering more than 900,000 square feet during the first six months of this year at rates only slightly less than those of the expiring leases.
SL Green has also continued to cash in on demand for high-quality office buildings by institutional investors. It sold interests in several properties over the past year, generating significant cash proceeds to repay debt, repurchase shares, and fund new investments. The company has also continued to pay an attractive monthly dividend that currently yields 5.1%. The office REIT has increased that payout in each of the last 10 years.
Attractive options for yield-seeking investors
While it's getting harder to find yield in the current market, there are still a few solid options out there for income-focused investors. EPR Properties, Medical Properties, and SL Green all pay more than 5%. Further, those payouts should head higher in the future as these REITs grow their portfolios and income streams. That ability to earn attractive income with upside potential makes these REITs stand out as great options for yield seekers these days.