Income

3 real estate stocks that are passive income stars

A growing number of investors are looking for the safety and consistency of dividend-paying stocks in light of recent market volatility. After all, these types of stocks have long proven their ability to provide passive income, but some dividend-paying stocks outperform others in terms of reliability.

Real Estate Investment Trusts (REITs) Real estate income (O -0.89%), Federal Real Estate Investment Trust (FRT -0.36%)and WP Carey (WPC -0.06%) are three real estate stocks that are passive income stars, with long histories of above-average dividend yields.

WPC dividend yield data by YCharts.

The leading Dividend Aristocrat REIT

Realty Income is a dividend aristocrat that has raised its dividend 27 years in a row. In addition to its outstanding track record, Realty Income is also one of the largest net leasehold real estate investment trusts (REITs) in the world, owning and leasing approximately 11,400 properties in Europe and the United States.

Its tenant base, which is primarily made up of retail operators, includes quality tenants like walmart, fedexand B.J.. The REIT is expanding aggressively, having spent just over $3 billion so far this year and over $8 billion from 2020 to 2021. This rapid expansion has helped boost its revenue and continues to drive growth of its dividends.

Over the past year, the company has increased its dividend four times, an increase of around 4.8%. Its latest increase takes its yield to 4.3% today, with the stock trading around $67 at the time of this writing.

The only Dividend King REIT

What’s better than 27 years of dividend payments? Fifty years of dividend payments.

Federal Realty Investment Trust is the only REIT to also hold Dividend King stock, having increased its dividend for 55 consecutive years. This commercial REIT specializes in the ownership and leasing of 104 high-end outdoor shopping centers in suburban neighborhoods in nine major metropolitan markets.

The pandemic has been difficult for Federal Realty Investment Trust, but the company is seeing strong improvements. Leasing activity is up, occupancy is increasing, and funds from operations (FFO), a key measure of a REIT’s profitability, are increasing significantly year over year.

A recession could hamper its pace of recovery, but the company is in a strong financial position to weather any near-term headwinds. Its debt-to-EBITDA (earnings before interest, tax, depreciation and amortization) ratio of 4.3 is below the REIT industry average of five, and it has $176 million in cash and cash equivalents. Add to that its healthy dividend payout ratio of 67%, and it’s clear the company has plenty of room for growth.

Recent stock market volatility and concerns about the impact of a recession on retail spending have caused the company’s share price to fall 18% at the time of this writing. The decline in its share price works to investors’ advantage, pushing its dividend yield to just under 4.3%.

almost an aristocrat

WP Carey may not have a fancy title for the number of consecutive dividend increases he’s made, but make no mistake. The Diversified Net Lease REIT has an excellent track record, having maintained 24 years of dividend increases.

Unlike his fellow passive income stars, WP Carey isn’t exclusively focused on owning or renting one type of real estate. It has a diverse mix of over 1,300 properties, including self-storage facilities, industrial and warehouse buildings, offices and multi-family housing.

This diversification has worked well for the company over the years, helping it maintain slow but reliable growth for the company and its shareholders. It also helped keep its payout ratios within a normal range, despite the steady increases.

The stock has caught the attention of investors lately, driving its price up 5% in the past year. But don’t let the high price scare you away. Its dividend yield of just over 5% is one of the best in the REIT industry, given the reliability of the company.

Liz Brumer-Smith has no position in the stocks mentioned. The Motley Fool posts and recommends FedEx and Walmart Inc. The Motley Fool has a Disclosure Policy.