These REITs aren't always on the top list for high dividends. Mandated closures for schools and business, people working from home, and an overall decrease in consumer activity as a result of the coronavirus pandemic has hurt share values for these companies. While they may be suffering pricing volatility, their financials and portfolio's are strong, providing opportunity for growth while paying high dividends right now.
American Campus Communities
American Campus Communities is the leader in student housing and currently the only REIT that specializes in on- and off-campus student housing. The company has a strong track record and was poised for further growth until COVID-19 hit and nearly all universities and colleges closed their doors for the remainder of the spring semester. The company's value plummeted in March and has recovered some but still is below pre-pandemic levels. Despite the challenges, they achieved a 93.7% collection rate on average for the second quarter of 2020 and a fall semester pre-lease rate of 90.1%, just a few points shy of their average fall pre-lease rate.
While 62 of the 68 of the company's participating markets and universities have announced reopening in the fall, it's unknown if the universities will remain open as confirmed case numbers increase as a result of schools reopening, which creates more uncertainty for the company. With that being said, the company is likely able to weather the storm even though its payout ratio is at 127% currently.
Physicians Realty Trust
Physicians Realty Trust is a newer healthcare REIT that specializes in treatment centers, outcare patient facilities, clinics, and healthcare facilities near major medical centers. This allows for investment-grade tenants. The company was largely unaffected by COVID-19 when it comes to company operations, revenues, and rental collections. As of August 2020, 100% of their leased facilities are open and they collected 98% of Q2 billings.
Unlike the other high-dividend REITs mentioned here, Physicians Realty Trust saw a 15% increase in revenue when compared to the same quarter the year prior rather than taking a loss. It is also the only REIT in the lineup with a payout ratio under 100%, currently at 85%. This company is definitely in a strong position to grow with a high-quality tenant base, making its current dividend a very attractive buy.
Federal Realty Investment Trust
There have been a lot of challenges facing the retail sector, even before the global pandemic, but the current crisis has only intensified the pressure, pushing several large retailers into bankruptcy and leaving retail REITs struggling to collect rent. While retail REIT values have dipped as a whole, some are faring better than others. Federal Realty Investment Trust is one of them. The company has maintained stable rental collections, 76% as of July 2020 with 100% of their properties remaining open. Nearly all of their properties are open-air retail centers with 24% being anchored by essential service retailers such as grocery stores.
They have a low 3.03x year-to-date debt-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) in addition to $980 million in cash or cash equivalents at the end of Q2 2020, which means they are well-positioned financially to ride out turbulent times. Their current payout ratio is 137%, which is higher than I'd like to see but is largely due to the current decrease in revenues and FFO. Considering their payout ratio was 63% this same quarter a year prior, it's likely as the company recovers from the current crisis their ratios will become more sustainable.
High-paying dividends are great, but it isn't the only factor to consider when buying a REIT. Additional factors such as growth opportunities, the quality of the company's balance sheet, and ability to maintain those high dividends over time should be carefully considered -- and these three high-dividend REITs fit the bill right now.