Real estate investment trusts offer investors greater dividends than your average stock as long as it is understood that levels of risk are likely higher. REITs might be appropriate for a place in those portfolios where it represents diversification from growth-oriented sectors such as technology and social media.
REITs own assets which produce income from different kinds of property. They are similar to mutual funds except that instead of a portfolio of stocks, investors own real estate assets. It is a way to place money in that sector where dividends are paid and the value of underlying properties may rise.
These four real estate investment trusts are good examples.
Omega Healthcare Investors
Omega Healthcare Investors Inc (OHI, Financial) provides financing and capital to health care and operations and specializes in the area of skilled nursing facilities and assisted living facilities. The New York Stock Exchange-listed company invests in such properties in the United States and in the United Kingdom. Its market cap is $8 billion.
The past five-year earnings record shows growth of 29.20% and this year’s earnings are up by 2.50%. With a price-earnings ratio of 32, the stock is trading at 2.19 times its book value. The price-to-free cash flow ratio is 26.10. Omega Healthcare Investors pays a dividend yield of 8.09%.
NNN REIT
NNN REIT Inc. (NNN, Financial) invests in a diversified group of properties with 3,479 locations in 49 states and 350 tenants. As examples, its top four properties include 7-Eleven convenience stores, Mister Carwash, Camping World and LA Fitness. The company’s headquarters are located in Orlando, Florida. Its market capitalization comes to $7.05 billion.
This year’s earnings are up by 25.20% and, over the past five years, up by 5.40%. Now trading at 1.68 times book, the stock’s price-earnings ratio is 18.90. It is actively traded on the New York Stock Exchange with an average daily volume of 1.47 million shares.
NNN REIT has increased its dividend for 34 straight years and now pays a 5.88% rate.
Safehold
Safehold Inc. (SAFE, Financial) trades at a 43% discount to its book value with a market capitalization of $1.40 billion. It is a diversified REIT with investments in multifamily properties as well as in office, life science, hotel and mixed use areas. Total square feet comes to 33.2 million, according to the company's website.
Earnings over the past five years are down by 25.30% and off this year by 96.30%. The amount of long-term debt exceeds shareholder equity. The stock is relatively lightly traded for an NYSE-listed security with average daily volume of 570,000 shares. Safehold pays a 5.60% dividend.
Starwood Property Trust
Starwood Property Trust Inc. (STWD, Financial) is a mortgage REIT with a market capitalization of $6.49 billion. The company says it maintains a portfolio of “over $28 billion across its commercial and residential lending, infrastructure lending, investing and servicing and property business segments.”
The stock trades with a price-earnings ratio of 11.90 and at a 1.01 book value. This year’s earnings are up by 80% and up over the past five years by 12%. The New York Stock Exchange-listed company is actively traded with an average daily volume of 2.61 million shares. Starwood Property Trust pays a dividend of 9.15%.
Disclaimer: This is not investment advice. It’s for educational purposes only.
