Income investors looking for higher levels of income should consider high dividend REITs. REITs typically own real estate properties that are leased out to tenants. 

This creates a steady stream of cash flow for REITs, a significant portion of which is paid to shareholders in the form of dividends.

The following 3 REITs have strong property portfolios, and currently have dividend yields above 5%.

Realty Income (O)

Realty Income is a retail focused REIT that has become famous for its successful dividend growth history and monthly dividend payments. Today, the trust owns thousands of properties. Realty Income owns retail properties that are not part of a wider retail development (such as a mall), but instead are standalone properties. 

This means that the properties are viable for many different tenants, including government services, healthcare services, and entertainment.

Realty Income exceeded revenue expectations in the first quarter of 2024, reporting $1.26 billion in revenue following $598 million in investment volume. Its earnings slightly surpassed predictions, with normalized FFO per share reaching $1.05, a penny higher than the analyst estimate. This figure marked an increase from $1.00 in the previous quarter and $1.04 in the first quarter of 2023. 

Company management reaffirmed its 2024 guidance for normalized FFO and same-store rent growth, with expectations of acquisition volume around $2.0 billion.

Realty Income generates its growth through growing rents at existing locations, via contracted rent increases or by leasing properties to new tenants at higher rates, but also by acquiring new properties. Realty Income expects to increase its investments in international markets moving forward. 

It made a first deal in the UK in 2019 and plans to do more such deals in the future when it finds attractive targets. These acquisitions will help drive profits in the long run.

Realty Income has increased its dividend for 27 years, and is on the exclusive list of Dividend Aristocrats. The stock currently yields 6.0%.

Healthpeak Properties (PEAK)

Healthpeak Properties is the largest healthcare REIT in the U.S., with 774 properties. It was the first healthcare REIT that was included in the S&P 500. This healthcare REIT invests in life science facilities, senior houses, and medical offices, with 97% of its portfolio based on private-pay sources. 

In late April, Healthpeak Properties reported (4/25/24) financial results for the first quarter of fiscal 2024. Same-property net operating income grew 4.5% over the prior year’s quarter thanks to strong growth in the segment of continuing care retirement community and FFO per share rose 7%, from $0.42 to $0.45.

Healthpeak Properties benefits from favorable secular trends. As the baby boomer generation ages and the average life expectancy is on the rise, the senior population of the U.S. is expected to grow significantly in the upcoming years. The 80+ age group is expected to grow by about 5% per year on average until 2030. 

In addition, this age group has immense spending power, as its average net worth exceeds $640,000. Thanks to these trends, healthcare spending in the U.S. is expected to grow by about 5% per year on average until 2030. 

The recent merger with Physicians Realty is a major growth catalyst for the REIT. On March 1st, 2024, Healthpeak Properties closed its acquisition of Physicians Realty Trust (DOC) in an all-stock merger of equals valued at ~$21 billion. The new REIT expects to benefit from much greater scale and annual savings of up to $60 million by the end of next year, without a significant effect on its debt. On March 1st, 2024, Healthpeak Properties changed its ticker from PEAK to DOC. 

The company’s balance sheet is gradually improving. Healthpeak Properties has sold several assets and has used the proceeds to reduce its debt. As a result, the REIT has received credit rating upgrades from S&P and Fitch (to BBB+) as well as Moody’s (to Baa1).

DOC shares currently yield 6.1%.

American Assets Trust (AAT)

American Assets Trust (AAT) is a REIT that was formed in 2011 as a successor of American Assets, a privately held company founded in 1967.

AAT acquires and develops office, retail and residential properties throughout the U.S., primarily in Southern California, Northern California, Oregon, Washington and Hawaii.

Its office portfolio and its retail portfolio comprise of approximately 4.1 million and 3.1 million square feet, respectively. AAT also owns more than 2,100 multifamily units.

In late April, AAT reported (4/30/24) financial results for the first quarter of fiscal 2024. Adjusted same-store net operating income grew 2.3% and funds from operations (FFO) per share grew 8% over last year’s quarter, thanks to rent hikes and increased tourism in Hawaii.

Thanks to positive business trends, AAT raised its guidance for FFO per share in 2024 from $2.19-$2.33 to $2.24-$2.34.

AAT pursues growth by acquiring properties in submarkets with favorable supply and demand characteristics, including high barriers to entry. It also redevelops several of its newly-acquired properties in order to enhance their value. 

In addition, it has a capital recycling strategy, which involves selling properties whose returns seem to have been maximized and buying high-return properties. Thanks to these growth drivers, AAT has grown its adjusted FFO per share at a 4.4% average annual rate over the last decade.

AAT is offering a nearly 10-year high dividend yield of 6.0%. Given the healthy payout ratio of 58% and the reliable growth trajectory of the REIT, the dividend appears to be safe.