Real estate investment trusts (REITs) tend to be lower-risk investment options. That's because most REITs generate relatively steady income backed by rental agreements that they use to support stable dividends. However, not all REITs are risk-free, which was evident last year. Several slashed or suspended their dividends while two major mall REITs filed for bankruptcy.
Because of that, risk-averse investors still need to choose their REITs carefully. With that in mind, three of the safest REITs to buy right now are Camden Property Trust (NYSE: CPT), Duke Realty (NYSE: DRE), and Public Storage (NYSE: PSA).
A low-risk landlord
Camden Property Trust is a residential REIT focused on owning apartment buildings. What makes it safer than its rivals in the sector is its diversified portfolio spread across 14 markets primarily in the Sun Belt region, with most of its properties in suburban areas. Those locations have been less affected by the pandemic than the high-cost urban core areas along the coasts, which are the focus of larger rivals like AvalonBay (NYSE: AVB) and Equity Residential (NYSE: EQR).
The company complements its low-risk portfolio with one of the best financial profiles in the REIT sector. It's one of only eight REITs with A-rated credit. Meanwhile, it has a well-covered dividend. Those factors put its 3.4%-yielding dividend on rock-solid ground and give it the flexibility to continue expanding its portfolio with development projects and acquisitions. Because of that, its low-risk dividend will likely continue rising in the coming years.
Almost on the A-list
Duke Realty is an industrial REIT focused on owning warehouses crucial to supporting the growth of e-commerce. Its top tenant is e-commerce giant Amazon (NASDAQ: AMZN), at 10% of its annualized net lease value. That focus on high-demand logistics properties has helped keep occupancy levels high, enabling it to steadily increase rents while capturing expansion opportunities.
Duke has plenty of financial flexibility to expand thanks to its top-notch balance sheet. The company pays a well-covered dividend and has excellent credit. While it doesn't have an A-rating, its credit metrics are at "A" quality levels. Because of all that, Duke Realty's 2.7%-yielding dividend is on rock-solid ground and likely to continue growing for the foreseeable future.
A fortress-like balance sheet
Public Storage is the largest self-storage REIT. It currently controls 9% of the U.S. market, giving it significant scale.
It also boasts having the best balance sheet in the REIT sector. It has A-rated credit backed by the lowest leverage ratios in the industry. Add in a reasonable payout ratio, and its 3.6%-yielding dividend is on one of the firmest foundations in the REIT sector.
Given those metrics, Public Storage has nearly unparalleled financial flexibility to continue expanding its industry-leading portfolio. Meanwhile, it has a massive opportunity set since small non-REIT operators own 45% of the institutional quality properties in the U.S. market, leaving ample room for consolidation in the highly fragmented market.
Some of the safest REITs around
Camden Property Trust, Duke Realty, and Public Storage have some of the best safety features in the REIT sector. They combine high-quality portfolios with reasonable dividend payout ratios and top-tier balance sheets. Because of that, their dividends are on some of the firmest foundations in the sector, making them excellent options for investors seeking low-risk income streams.