In this article, we discuss 11 best REIT dividend stocks. You can skip our detailed discussion of the REIT sector and its performance over the years, and go directly to read 5 Best REIT Dividend Stocks.
Real estate investment trust (REIT) companies own and operate income-generating properties, such as office buildings, shopping centers, apartment complexes, and hotels. The REIT sector in the US has grown significantly in recent years, and there are now more than 225 publicly traded REITs listed on major stock exchanges, according to Nareit. These REITs have a collective market capitalization of over $1 trillion.
Last year’s elevated interest rates and tight monetary policies affected the REIT sector because growing interest rates can increase the borrowing costs of properties which can reduce the profitability and dividend payments of REIT companies. In our previous article, we reported that monthly mortgage payments for prospective buyers increased by about 60% last year due to high-interest rates. Moreover, REIT stocks also reported negative returns in 2022 amid market turmoil. The MSCI US REIT Index, which tracks the performance of publicly traded REITs, declined about 26% in 2022 through October 31, compared with a 16.5% drop in the S&P 500 in this period.
Though last year was challenging for real estate companies, the sector has outperformed other asset classes over long-term periods. REITs can offset the negative effects of higher interest rates through other means, such as increasing rental rates or diversifying their portfolios. According to a report by Nareit, during the last six recessions between the fourth quarter of 1978 and the third quarter of 2022, FTSE Nareit All Equity Index outperformed the Russell 1000 Index before, during, and after recessions. The report also showed that REITs outperformed private real estate in the four quarters after the recession during this period. Some of the best dividend stocks from the REIT sector include American Tower Corporation (NYSE:AMT), Prologis, Inc. (NYSE:PLD), and Crown Castle Inc. (NYSE:CCI).
Cohen & Steers also published a paper that highlighted the performance of the REIT sector over the years. The report mentioned that REITs outperformed diversified core funds by 470 basis points annually over the past 30 years. This period also saw two commercial real estate clashes but the sector remained stable. The paper further revealed that the REIT sector delivered a 10.6% annual average return in the past 15 years, compared with a 6.5% return of the core funds during this period.
For 2023, analysts are expecting the sector to rebound once there is a pause in continuous interest rate hikes. To know more about the industry outlook, readers can have a look at 13 Most Undervalued REIT Stocks to Buy.
11 Best REIT Dividend Stocks
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Our Methodology:
For this list, we scanned Insider Monkey's database of 943 hedge funds as of Q4 2022 and picked REIT companies that have raised their dividend for at least five years. Next, we narrowed down companies that are popular among elite funds at the end of Q4 and ranked them in ascending order of the number of funds that have stakes in them.
11. Universal Health Realty Income Trust (NYSE:UHT)
Number of Hedge Fund Holders: 4
Universal Health Realty Income Trust (NYSE:UHT) is an American real estate investment trust company that specializes in healthcare and human service-related facilities. In the fourth quarter of 2022, the company posted revenue of $24.1 million, which showed a 12.7% growth from the same period last year. At the end of December 2022, its total assets stood at over $607.5 million, which shows that the company's cash position is strong.
Universal Health Realty Income Trust (NYSE:UHT) is one of the best dividend stocks on our list as it has raised its dividends for 38 years in a row. The company offers a quarterly dividend of $0.715 per share for a dividend yield of 6.12%, as of April 18. American Tower Corporation (NYSE:AMT), Prologis, Inc. (NYSE:PLD), and Crown Castle Inc. (NYSE:CCI) are some other best dividend stocks from the REIT sector.
At the end of Q4 2022, 4 hedge funds in Insider Monkey’s database reported owning stakes in Universal Health Realty Income Trust (NYSE:UHT), the same as in the previous quarter. The collective value of these stakes is roughly $13 million.
Federal Realty Investment Trust (NYSE:FRT) mainly invests in shopping centers in different parts of the US. On February 9, the company declared a quarterly dividend of $1.08 per share, which was consistent with its previous dividend. It is a Dividend King with 55 years of consecutive dividend growth, which makes it one of the best dividend stocks on our list. The stock's dividend yield on April 18 came in at 4.41%.
Mizuho gave a positive outlook on the shopping center REITs as they posted strong quarterly earnings. In view of this, the firm maintained a Buy rating on Federal Realty Investment Trust (NYSE:FRT) in March with a $116 price target.
Federal Realty Investment Trust (NYSE:FRT) generated over $280.6 million in revenues in Q4 2022, which showed a 10.2% growth from the prior-year period. The company had over $85.5 million available in cash and cash equivalents at the end of December 2022.
At the end of Q4 2022, 16 hedge funds tracked by Insider Monkey owned stakes in Federal Realty Investment Trust (NYSE:FRT), worth over $75.7 million collectively.
National Retail Properties, Inc. (NYSE:NNN) is a Florida-based real estate investment trust company that invests in high-quality properties that are subject to long-term leases. In January, Oppenheimer called the stock its top pick in the REIT sector and raised its price target on the stock to $54. The firm maintained an Outperform rating on NNN.
On April 4, National Retail Properties, Inc. (NYSE:NNN) declared a quarterly dividend of $0.55 per share, which fell in line with its previous dividend. In 2022, the company raised its dividend for the 33rd consecutive year, which makes it one of the best dividend stocks in the REIT sector. The stock has a dividend yield of 5.12%, as of April 18.
In the fourth quarter of 2022, National Retail Properties, Inc. (NYSE:NNN) reported revenue of nearly $200 million, which was up 6% from the same period last year. During the quarter, the company sold seven properties with net proceeds of $16 million.
At the end of December 2022, 18 hedge funds tracked by Insider Monkey were long National Retail Properties, Inc. (NYSE:NNN), compared with 22 in the previous quarter. The stakes owned by these hedge funds have a collective value of roughly $110 million. Among these hedge funds, Bridgewater Associates was the company's leading stakeholder in Q4.
Agree Realty Corporation (NYSE:ADC) is a real estate investment trust company, based in Michigan, US. The company acquires retail properties on a net lease. It is one of the best dividend stocks on our list as it pays monthly dividends to shareholders. On April 13, the company announced a 1.3% hike in its monthly dividend to $0.243 per share, which marked the company's 12th consecutive year of dividend growth. The stock's dividend yield came in at 4.33% on April 18.
In Q4 2022, Agree Realty Corporation (NYSE:ADC) reported revenue of $116.5 million, which saw a 27.5% growth from the same period last year. The company ended the year with $1.5 billion of total liquidity. As of the fourth quarter, the company's dividends represented payout ratios of approximately 75% of Core FFO per share and 76% of AFFO per share, respectively.
Mizuho maintained a Neutral rating on Agree Realty Corporation (NYSE:ADC) with a $73 price target, expressing concerns regarding the current market situation.
At the end of December 2022, 21 hedge funds in Insider Monkey’s database owned stakes in Agree Realty Corporation (NYSE:ADC), compared with 26 in the previous quarter. These stakes have a consolidated value of over $371 million.
CubeSmart (NYSE:CUBE) is a self-managed real estate investment trust company that owns self-storage facilities in the US. In the fourth quarter of 2022, the company generated $200.7 million in revenues, up 9.5% from the same period last year. At the end of December 2022, the company had over $6 million available in cash and cash equivalents and its total assets amounted to over $6.3 billion.
CubeSmart (NYSE:CUBE), one of the best dividend stocks on our list, currently pays a quarterly dividend of $0.49 per share. The company has raised its dividends for 13 consecutive years and has a payout ratio of 73.1% as of Q4 2022. The stock's dividend yield on April 18 came in at 4.25%.
As of the close of Q4 2022, 21 hedge funds in Insider Monkey's database reported having stakes in CubeSmart (NYSE:CUBE), with a collective value of over $170.7 million.
Baron Funds mentioned CubeSmart (NYSE:CUBE) in its Q4 2022 investor letter. Here is what the firm has to say:
“Following a sharp correction in the share price of CubeSmart (NYSE:CUBE) in 2022, we initiated a position. The company is the third largest self-storage REIT. CubeSmart owns and operates a high-quality portfolio of approximately 1,274 self-storage properties. With its well-located real estate portfolio and conservative balance sheet, we believe the company is well positioned to generate solid cash-flow growth and strong performance returns in the next few years.”
Realty Income Corporation (NYSE:O) is another best dividend stock on our list from the REIT sector. The company offers monthly dividends to shareholders and currently pays a monthly dividend of $0.255 per share. It has been raising its dividends for 29 years. The stock has a dividend yield of 5.01%, as of April 18.
In addition to Realty Income Corporation (NYSE:O), American Tower Corporation (NYSE:AMT), Prologis, Inc. (NYSE:PLD), and Crown Castle Inc. (NYSE:CCI) are some other popular dividend stocks from the REIT sector.
As per Insider Monkey's database for Q4 2022, 24 hedge funds owned stakes in Realty Income Corporation (NYSE:O), compared with 28 in the previous quarter. These stakes are valued at roughly $327 million collectively.
