Are you an investor in search of higher income levels from your portfolio? If so, Real Estate Investment Trusts (REITs) might be the answer. These companies own real estate properties that generate income through leases or real estate backed loans. The income is distributed to shareholders in the form of dividends, making REITs an attractive option for income-focused investors.
Here are some key points to consider when looking at high-yield REITs:
- Distribution of Income: REITs are required to distribute 90% of their taxable income to shareholders in the form of dividends. This leads to high dividend yields of 5%+ in many cases.
- Fundamental Analysis: While high-yielding stocks may seem appealing, it’s crucial to assess the fundamentals of the REIT. Factors like dividend safety, valuation, management, balance sheet health, and growth are key considerations.
- Risk Assessment: High yields don’t always equal a solid investment. Conduct thorough due diligence to understand the risks associated with high-yield securities, as there is a potential for dividend reductions or deteriorating business results.
Now, let’s delve into some of the top high-yield REITs to consider:
Global Net Lease (GNL)
- Invests in commercial properties in the U.S. and Europe with a focus on sale-leaseback transactions.
- Reported strong financial and operational results for the first quarter of 2024, with notable improvements in core funds from operations and adjusted funds from operations.
- Closed and disposed of assets totaling $554 million, showcasing a solid cash cap rate on occupied assets.
Two Harbors Investment Corp. (TWO)
- Focuses on residential mortgage real estate investments, with a significant portion of revenue derived from interest through available-for-sale securities.
- Reported a book value of $15.64 per common share and declared a first-quarter common stock dividend of $0.45 per share, representing a 5.8% quarterly economic return on book value.
- Settled $3.1 billion unpaid principal balance of MSR through bulk purchases and flow-sale acquisitions.
Apollo Commercial Real Estate Finance (ARI)
- Invests in debt securities including senior mortgages, mezzanine loans, and other commercial real estate-related debt in the U.S. and Europe.
- Reported first-quarter distributable earnings that surpassed Wall Street consensus, but experienced a decline in interest income and a rise in expenses.
- Book value per share declined in the quarter due to an incremental CECL allowance on a mezzanine loan secured by an ultra-luxury condominium development.
In Conclusion
While high-yield REITs offer attractive income opportunities, investors must conduct thorough research to ensure that these investments align with their risk tolerance and financial goals. Remember, high yields come with potential risks, and it’s essential to assess the underlying fundamentals of the REITs before making investment decisions.
