Higher Dividends Should Lift These 3 REITs Onto Your Watchlist

It may seem like an odd time to consider investing in real estate investment trusts (REITs). Just this week, Glenn Kelman, chief executive officer (CEO) of Redfin, said the housing market hit "rock bottom." 

However, the stock market is always forward-looking. Therefore, if Kelman is correct, rock bottom in REITs likely occurred earlier this year. That's music in the ears of income-oriented investors. These investment vehicles took it on the chin in 2022 and the first half of 2023. 

But the outlook could be changing. The S&P United States REIT index is up 6% in 2023. That may not excite growth investors. But if you're making a comparison to treasury bills that yield around 5%, it may be time to look at REIT stocks.  

REITs are required to pay up to 90% of their earnings (profits) to shareholders as dividends. That's why they have dividend yields that are among the highest that investors can get.  

And when they raise those dividends, it makes owning these stocks more attractive. That’s the case with the three REITs in this article. Each recently raised its dividends which creates a buying opportunity. 

A Different Way to Invest in Consumer Staples 

Consumer staples include the necessities consumers need to buy in good times and bad. The Necessity Retail REIT (NASDAQ: RTL) is the leading publicly traded REIT focusing on the locations "Where America Shops."  

The company's broad portfolio includes 1,057 properties in 48 states. Yet no tenant makes up more than 8% of single-line rent (SLR). Its top three categories by percentage of SLR are dollar stores, gas/convenience stores, and specialty retail stores.  

In May 2023, Necessity Retail signed a definitive agreement to merge with Global Net Lease, Inc. (NYSE: GNL). The company expects the merger to close in September 2023. Analyst sentiment is mixed but mostly bullish. In fact, on August 16, B. Riley raised its price target for RTL stock to $10 from $8. This was after the firm had lowered its price target from $10 to $8 in May.  

In July, Necessity Retail raised its dividend from 21.25 cents to 21.30 cents. The dividend yield as of August 17, 2023, is 12.13% which is higher than the sector average of around 7%.  

This REIT is Helping to Combat Rising Concerns About Food Scarcity 

Gladstone Land (NASDAQ: LAND) owns and acquires farmland and farm-related properties in major U.S. agricultural markets. The company leases those properties to farmers to combat the decreasing supply of arable farmland. 

Gladstone notes that prime farmland in optimal climates will remain in high demand. Its primary focus is on farmland for growing fresh produce. In its investor presentation, the company notes that this type of farmland yields the higher revenue per acre, is the most profitable for farmers, and generates the highest rents for landlords.  

Gladstone is a monthly dividend stock, and the company increased its dividend in April and again in July. It currently pays 4.42 cents per share with a yield of 3.39% 

LAND stock is down 11% in 2023 but up nearly 6.5% in the last three months. This suggests investor sentiment may be changing. Analysts are forecasting 40% growth in the next 12 months. That corresponds to a price target of $22.67.  

What if the Consumer Keeps Spending? 

The consumer has been remarkably resilient. That's been particularly noticeable in travel and tourism-related stocks. The last of the three REITs on this list can help you capitalize on this trend. Host Hotels & Resorts, Inc. (NASDAQ: HST) focuses on hotel properties including Hilton Worldwide Holdings, Inc. (NYSE: HLT), Marriott International, Inc. (NASDAQ; MAR) and Hyatt Hotels Corporation (NYSE: H). These have been some of the best-performing chains in an outperforming sector. 

Approximately 65% of the company's room revenue comes from the business traveler. That may concern investors if the economy is heading for a recession. However, as we've seen since 2020, the lines between work and leisure continue to blur.  

That being said, the pandemic halo has come off HST stock. It's now trading below its February 2020 price. Yet analysts remain somewhat bullish. The stock has a consensus price target of $20.44, a 27% gain from its current price.  

The company suspended its dividend in 2020 but brought it back in 2022 and has been raising it vigorously ever since. It's currently paying out 15 cents a share which is just 20% below its February 2020 payout of 20 cents per share.  

The article "Higher Dividends Should Lift These 3 REITs Onto Your Watchlist" first appeared on MarketBeat.