The two essential characteristics of income stocks investors look for when considering a purchase of real estate investment trusts (REITs) are safety and reliability of the dividend.
Safety means that the dividend is well covered by the company’s funds from operation. Reliability speaks to the history of dividend payments. Are they consistent over time without cuts or eliminations? Here are three REITs with the most reliable dividends that investors can count on through good times and bad:
Federal Realty Investment Trust (NYSE:FRT) is a North Bethesda, Maryland-based diversified REIT that owns shopping malls, office buildings and residential units. Federal Realty Investment Trust, a member of the S&P 500, has been in business since 1962 and is one of the oldest REITs on Wall Street. It owns 105 commercial properties with some 3,100 tenants and 3,400 residential units, mostly on the East and West coasts of the U.S.
Federal Realty Investment Trust holds the REIT record for annual dividend increases of 55 years and counting. It recently increased its quarterly dividend from $1.07 to $1.08, and the $4.32 annual dividend now yields 4.7%. The dividend is well covered by annual FFO, which Federal Realty Investment Trust recently forecasted to be in a range from $6.10 to $6.25.
On Oct. 19, Jefferies Financial Group hiked its third-quarter earnings-per-share (EPS) estimates for Federal Realty Investment Trust from $1.52 to $1.53. Federal Realty Investment Trust could be the most reliable dividend provider in the universe of REIT stocks.
Coming in second behind Federal Realty Investment Trust is Realty Income Corp. (NYSE:O), a retail REIT that calls itself The Monthly Dividend Company.
Realty Income owns and operates over 11,400 commercial properties under long-term net lease contracts. Its tenants are large, well-known companies like Walgreens Co., 7-Eleven Inc., CVS Pharmacy Inc., Lowe’s Cos. Inc., Dollar General Corp., FedEx Corp. and Walmart Inc.
A member of the S&P 500, Realty Income is also a member of the Dividend Aristocrats Index for 53 years of providing monthly dividend income to shareholders. It has increased the dividend 117 times since going public in 1994. Its most recent quarterly FFO of $0.99 cents per share is more than ample for paying out $0.745 over three months. The current yield on the annual income of $2.98 is 5.1%.
For safety and reliability, income investors have been able to count on Realty Income Corp. over the years, and this trend may well continue for decades to come.
National Retail Properties Inc. (NYSE:NNN) is similar to Realty Income in that it owns a diversified group of well-known retail outlets with tenants that include 7-Eleven, Best Buy Co. Inc., BJ’s Wholesale Club Holdings Inc. and Camping World Holdings Inc.. Its occupancy rate is over 99% with an average lease term of over 10 years.
When you click on National Retail Properties’ website, the first words that greet you are “The power of consistency is profound.” That is true for this REIT.
National Retail Properties has raised its dividends for over 33 consecutive years. Its most recent quarterly FFO was $0.77, easily covering the $0.55 quarterly dividend. Over the past five years, National Retail Properties has raised its dividend by 15.7%. The current dividend yields 5.5% and could provide safety and consistency to income investors for a very long time.
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