Summary: High-dividend real estate investment trusts (REITs) are real estate-related financial assets that provide investors with an excellent opportunity to establish a source of passive income. This article will list five high-dividend REITs to invest in 2024 using a reputable third-party investing service like eToro.
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About high dividend REITs
Real estate investment trusts (REITs) are companies that finance, own, or manage income-producing real estate. These properties can include residential or commercial properties, such as apartment complexes, office buildings, and retail.
Dividend stocks are shares in a company that pays out a portion of its profits to its stakeholders through yearly, quarterly, or monthly dividend payments.
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For example, if a REIT has an annual dividend yield of 7% and its shares cost $50, the company will pay its investors a total of $3.50 per share for that year.
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Top five high dividend REITs to invest in
After detailed research of the current market, we have come up with our top five high-dividend REITs, based on the above criteria and slightly favoring high-market capitalization companies, which tend to be more stable.
Here are the top 5 high-yield dividend REITs:
- Realty Income (NYSE: O);
- Annaly Capital Management (NYSE: NLY);
- Arbor Realty Trust (NYSE: ABR);
- Starwood Property Trust (NYSE: STWD);
- Omega Healthcare Investors (NYSE: OHI).
To securely invest in high-dividend yield REITs, we recommend the following:
- Commission-free stock and ETF trading;
- 2,000+ stocks from 17 exchanges;
- Fractional shares available;
- User-friendly platform.
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High Dividend REIT #1: Realty Income (NYSE: O)
Realty Income Corporation is a REIT with a history of over 50 years leasing properties in the UK, the US, and Spain. It is also known as “The Monthly Dividend Company”.
Headquartered in San Diego, California, Realty Income owns over 13,000 assets, mostly long-term leased to commercial clients. The REIT is among the top dividend stocks, increasing its dividend 122 times since going public in 1994. As of December 2023, it has a dividend yield of 5.42% and a compound annual dividend growth rate of 4.3%.
Note
O stock price today
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High Dividend REIT #2: Annaly Capital Management (NYSE: NLY)
Annaly Capital Management, Inc. is a high-dividend REIT that primarily generates revenue from mortgage-backed securities issued by Fannie Mae and Freddie Mac.
Founded in 1997 in New York City, the company chiefly invests in residential and commercial securities, benefiting from the net spread between the interest and borrowing costs multiplied by leverage.
As of December 2023, Annaly Capital Management has a dividend yield of 12.83% and a market capitalization of $8.97 billion. It is a component of the S&P 400 index.
Note
NLY stock price today
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High Dividend REIT #3: Arbor Realty Trust (NYSE: ABR)
Arbor Realty Trust, Inc. is a prominent high-dividend REIT and a nationwide U.S. lender specializing in bridge loans, mezzanine loans, and agency financing, with a solid presence in the real estate market.
Based in Uniondale, New York, Arbor manages a multibillion-dollar servicing portfolio, primarily within the Fannie Mae, Freddie Mac, and FHA domains. It has built a reputation for its expertise in structured finance and a significant US presence in supporting real estate transactions. It is an S&P 600 index component.
As of December 2023, the company has a dividend yield of 10.91% and a market capitalization of $2.72 billion.
Note
ABR stock price today
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High Dividend REIT #4: Starwood Property Trust (NYSE: STWD)
Starwood Property Trust, Inc. is one of the largest commercial mortgage REITs in the U.S., with a core in real estate and a broad portfolio of office buildings, multifamily properties, and infrastructure projects.
The trust is an affiliate of Starwood Capital Group, which allows it to tap into its global market presence to identify and execute secure deals risk-adjusted for returns across its portfolio of $28 billion across debt and equity investments.
As of December 2023, Starwood Property Trust has a dividend yield of 8.78% and a market capitalization of $6.26 billion.
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STWD stock price today
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High Dividend REIT #5: Omega Healthcare Investors (NYSE: OHI)
Omega Healthcare Investors, Inc. is a leading real estate investment trust financing, owning, and managing a portfolio of over 65 skilled nursing and assisted living facilities.
Since 1992, when it went public, the company has contributed to the healthcare real estate sector, securing long-term triple-net leases and capitalizing on the aging population trend in the U.S. and the U.K.
As of December 2023, Omega Healthcare has a dividend yield of 8.73% and a market capitalization of $8.27 billion.
Note
OHI stock price today
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How to invest in high dividend REITs: step-by-step
High-dividend REITs combine the advantages of gaining exposure to the real estate market without owning property yourself and the passive income generation from its high-yield dividends. To invest in these REITs using an online brokerage, follow these steps:
Step 1: Choose a broker
Before investing in REITs, you must gain access to the stock market. The best type of service for this is an online brokerage.
To securely invest in high-dividend REITs, we recommend the following:
- Commission-free stock and ETF trading;
- 2,000+ stocks from 17 exchanges;
- Fractional shares available;
- User-friendly platform.
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Step 2: Open and fund your account
Once you decide on the brokerage, you need to register and verify your account. After you complete the verification, you should transfer funds that you will use to buy REIT stocks to your account.
Some standard funding methods include a bank transfer, debit or credit card, or financial transaction services like PayPal (PYPL).
Step 3: Decide how much you want to invest in high dividend REITs
Keeping within your budget domain is vital, as going beyond can lead to a debt spiral. To avoid that outcome, make sure you have done the following:
- Paid off all high-interest debt, such as credit cards and personal loans;
- Created an emergency fund that covers at least three months of daily life expenses.
Remember
Step 4: Place your order and buy high dividend REITs stock
The next step is to place an order and purchase the high-div shares. Follow this process:
- Step 1: Log into your brokerage and find the ticker symbol of the REIT you wish to invest in;
- Step 2: Designate the sum or the number of shares you want to purchase;
- Step 3: Select the order type (market order or limit order) and place it;
- Step 4: Confirm the trade order.
Step 5: Monitor and manage your high dividend REITs investment
You must monitor and manage your investment for as long as you hold onto the REIT stocks. Keeping informed about the performance of your financial asset, as well as the general property market tendencies, is vital to the success of your investment.
Pros and cons of investing in high dividend REITs
Pros
- Steady income: High-dividend REITs have a lucrative potential return on your investment in the long run, making them popular with income-oriented investors and those looking to establish a reliable stream of revenue;
- Diversification: REITs typically have a diverse network of assets within single or multiple sectors, leading to risk mitigation that can help reduce losses in case of economic downturns;
- Liquidity: REITs are publicly traded on stock exchanges. Unlike physical real estate, these assets are much easier to buy or sell;
- Tax advantages: REIT investment often comes with tax benefits, such as pass-through taxation. Since these companies must distribute 90% of their taxable income to shareholders as dividends, such an investment can potentially provide a tax-efficient income;
- High dividends and professional management: High-dividend REITs tend to have significant industry experience to both provide such lucrative returns and successfully manage the risk associated with substantial potential gains.
Cons
- Interest rate sensitivity: The law requires that the REIT distributes at least 90% of its taxable income to shareholders, leaving debt one of the few available financing options. This financial approach is highly sensitive to fluctuations in interest rates, potentially affecting REITs’ fiscal performance;
- Lack of direct control: Investing in a REIT implies that you have no direct control over underlying asset management, as you have to rely on the board’s decisions instead. This lack of direct control might not suit property-selective investors;
- Tenant-related risks: High-dividend REITs’ profitability is bound to their tenant portfolio and lease agreements, especially if their scope of operations is narrow or tied to a single sector. In case of a prominent tenant quitting the deal or a sector-specific disaster, the risk can be very high.
Common mistakes to avoid when investing in high dividend REITs
Make sure to avoid these common investing mistakes:
- Lack of research: Research the REIT stock in detail, along with the market state of the property sector, before investing;
- Lack of strategy: Set your goals before you spend any money;
- Staking everything on one asset: Always diversify your portfolio;
- Falling prey to scams: Avoid illegal platforms and suspicious deals.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about how to invest in high dividend REITs
What are high dividend REITs?
High-dividend REITs are real estate investment trusts that pay dividends to shareholders and have a high dividend yield, usually over 5%, with some of the entries on this list going above 10%.
How much do REITs pay in dividends?
The law mandates that REITs pay at least 90% of their taxable income as dividends. High-yield dividend REITs can have annual dividend yields of over 10%.
Why should I invest in high dividend REITs?
High-dividend REITs have the added component of giving out a passive income on top of their face value appreciation. This source of steady revenue is particularly attractive to income-oriented investors.
How do I invest in high dividend REITs?
Investing in high-dividend REITs is very much similar to investing in regular stocks. You need to register an account with a brokerage and buy the shares, just like with any other company.
What are the top high dividend REITs to invest in 2024?
Some of the best high-dividend REITs include Realty Income, Annaly Capital Management, Arbor Realty Trust, Starwood Property Trust, and Omega Healthcare Investors.
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