US REITs were created in 1960 by Congress as a way for all investors to have access to large-scale, income-producing real estate accessible. To qualify as a REIT, the trust must comply with IRS rules. These rules include: 1) distributing annually as dividends at least 90% of its taxable income, 2) investing at least 75% of its total assets in real estate and 3) deriving at least 75% of gross income from real estate.
The 90% distribution requirement along with no corporate income taxes are the reasons REITs yields are often above average. However, it is important to note that because REITs pay no income tax, their dividends are not eligible for the special treatment as a "qualified dividends," which are normally taxed at 15%.
When comparing REIT yields to investments with qualified dividends, you must always look at them on an after-tax basis. REITs trade on major stock exchanges and have become immensely popular since their introduction.
This week week, I screened my dividend growth stocks database for REITs with a yield at or above 5% and have increased their dividends for at least 10 consecutive years. The results are presented below:
W.P. Carey & Co. (NYSE:WPC)
Yield: 5.1% | Years of Dividend Growth: 12
W. P. Carey & Co. LLC is an investment firm that provides long-term sale-leaseback and build-to-suit transactions for companies worldwide and manages a global investment portfolio. WPC is technically not a REIT, but a Limited Partnership focusing on Real Estate.
Realty Income Corp. (NYSE:O)
Yield: 5.2% | Years of Dividend Growth: 17
Realty Income Corporation is a real estate investment trust that owns a diversified portfolio of 2,339 retail properties as of Dec. 31, 2009.
HCP Inc. (NYSE:HCP)
Yield: 5.2% | Years of Dividend Growth: 11
Health Care Property Investors Inc. is an equity-oriented real estate investment trust, based in California, that has direct or joint venture investments in health care-related facilities across the US.
Corporate Office Properties (NYSE:OFC)
Yield: 5.3% | Years of Dividend Growth: 14
Corporate Office Properties is a real estate investment trust that owns, manages, leases, acquires and develops suburban office properties located in Mid-Atlantic region of the US and other select markets.
Washington Real Estate Investment Trust (NYSE:WRE)
Yield: 5.3% | Years of Dividend Growth: 14
Washington Real Estate Investment Trust is a real estate investment trust that owns and develops income-producing real properties in the greater Washington metro region.
Urstadt Biddle Properties (NYSE:UBA)
Yield: 5.4% | Years of Dividend Growth: 17
Urstadt Biddle Properties is a real estate investment trust that acquires, owns and manages commercial real estate properties primarily in the northeastern US.
National Retail Properties Inc. (NYSE:NNN)
Yield: 6.2% | Years of Dividend Growth: 20
National Retail Properties Inc. is an equity real estate investment trust that invests in high-quality, freestanding retail properties subject to long-term net leases with major retail tenants.
Senior Housing Properties Trust (NYSE:SNH)
Yield: 6.3% | Years of Dividend Growth: 10
Senior Housing Properties Trust, a real estate investment trust (REIT), primarily invests in senior housing properties.
Getty Realty Corp. (NYSE:GTY)
Yield: 7.6% | Years of Dividend Growth: 15
Getty Realty Corp. is a real estate investment trust that specializes in the ownership and leasing of retail motor fuel and convenience store properties and petroleum distribution terminals in the US.
As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 200+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: Long GTY, NNN, HCP, O. No position in the aforementioned securities. See a list of all my income holdings here.
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- Increasing Dividend Yield Part III: Preferred Stock
- Increasing Dividend Yield Part II: REITs
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- 38 Dividend Securities For A Well-Rounded Asset Allocation
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