Real estate often makes an excellent retirement-focused investment. Rental property investing has two big selling features: These properties tend to steadily appreciate in value, and they generate rental income. Unfortunately, there seem to be as many cons as pros to being a landlord, which is why it's not for everyone.
However, an easier way to invest in real estate is through real estate investment trusts (REITs). Three great ones for retirement-focused investors are Camden Property Trust (NYSE: CPT), Realty Income (NYSE: O), and Medical Properties Trust (NYSE: MPW).
The benefits of being a landlord without all the work
Camden Property Trust is a residential REIT focused on owning apartment communities in fast-growing cities, primarily in the Sun Belt region. The company currently owns interest in 167 communities with more than 56,000 apartment homes. It has a diverse mix of properties by geography (14 major markets across the south), asset class (32% Class A and 68% Class B), and location (37% urban and 63% suburban). That well-rounded portfolio helps it appeal to a wide variety of prospective renters. It also enables the company to generate relatively steady rental income.
Adding to the REIT's overall stable profile is its strong balance sheet. It has A-rated credit and a reasonably conservative dividend payout ratio. That gives it the financial flexibility to grow its apartment portfolio through development projects and acquisitions. Camden currently has eight development projects underway to add more than 2,600 apartment homes to its portfolio in the coming years across some of the fastest-growing markets. Camden's strategy should enable retirement-focused investors to benefit from steady dividend growth and stock price appreciation in the coming years without lifting a finger.
The definition of dependability
Realty Income has lived up to its name over the years. The retail REIT has paid 610 consecutive monthly dividends. Further, the company has increased its payout 110 times since its initial public offering in 1994, including in the last 94 straight quarters. Overall, it has grown its payout at a 4.4% compound annual rate.
Driving that fantastic dependability is the REIT's strategy. Realty Income focuses on owning a diversified portfolio of freestanding properties triple net leased to high-quality tenants resistant to economic downturns or insulated from disruption from e-commerce. That enables it to generate stable rental income. The company complements that with a fortress-like balance sheet and a reasonable dividend payout ratio. Those features give it the financial flexibility to make acquisitions that grow its portfolio, funds from operations (FFO), and dividend. That dependable growth makes it an outstanding REIT to hold with retirement in mind.
A healthy future
Medical Properties Trust has done an excellent job growing shareholder value over the years. The hospital-focused healthcare REIT has increased its dividend in each of the last eight years, growing it at a 5% compound annual rate. Meanwhile, the company has outperformed its peers and the S&P 500 over the previous three-, five-, and ten-year periods and since its IPO in 2005.
Driving the REIT's growth has been a steady stream of hospital acquisitions. For example, last year, it closed nearly $3.6 billion of new investments, which helped drive a 21% increase in its normalized FFO per share. With a solid financial profile and reasonable dividend payout ratio, Medical Properties Trust has the financial flexibility to keep making acquisitions. And, with an addressable market of more than $500 billion of operator-owned hospitals in its target markets, it should have plenty of opportunities. That should allow it to continue growing its FFO, dividend, and shareholder value, making it a great REIT to own in a retirement portfolio.
High-quality REITs to hold for the long haul
Camden Property, Realty Income, and Medical Properties Trust pay growing dividends backed by high-quality portfolios and rock-solid balance sheets. That should enable them to continue growing their value in the future as they expand their portfolios and dividends. This combination of stability and upside make them everything a retirement-minded investor could want in a REIT.