Real estate investment trusts (REITs) are one of the most attractive places for income investors. Not only do REITs have a strong track record of growing dividends, they can also reward investors with a growing share price, meaning investors can win in two ways.
REITs have a special tax benefit that is not available to most companies. Their corporate profits are not taxed in exchange for paying out the majority of those profits to shareholders. This advantage generally makes REITs an attractive place to finance real estate, meaning the sector continues to grow and acquire more investment-grade properties.
To find some top-performing names for the long term, we screened the REIT sector for some of its most promising features.
Best REITs by Total Return
The REITs here show the highest total returns over the past five years based on the following criteria:
- US companies trading on local stock exchanges
- A growing dividend over the past five years
- A positive total return over the past five years
| Company (ticker) | Total return over 5 years | Dividend yield | Dividend growth over 5 years |
|---|---|---|---|
| Data from Charles Schwab as of January 9, 2024 | |||
| Innovative Industrial Properties (IIPR) | 157.0% | 7.6% | 66.8% |
| Plymouth Industrial REIT (PLYM) | 156.1% | 3.8% | 1.6% |
| Equinix (EQIX) | 125.0% | 2.1% | 9.5% |
| Prologis (PLD) | 121.8% | 2.6% | 12.4% |
| Eastgroup properties (EGP) | 107.9% | 2.8% | 13.3% |
| Gaming and Leisure Properties (GLPI) | 99.7% | 6.0% | 1.1% |
| Extra space storage (EXR) | 98.5% | 4.1% | 14.0% |
The results here rank these REITs in order of their five-year total returns to investors, potentially highlighting companies that may continue to grow at high rates in the future. While past performance is no guarantee of future performance, some REIT subsectors may continue to outperform for years to come, such as logistics real estate, self-storage real estate and data centers.
Investors looking for the highest total returns – not just the highest current dividends – may want to focus on the best REITs in the popular or soon-to-be popular sectors.
Best REITs for High Dividends and Growth
Other REIT investors may focus on current income and the prospect of growing dividends – and REITs are one of the best passive investments. The REITs below show a combination of high current yields and growth based on the following criteria:
- US companies trading on local stock exchanges
- A current dividend between 2 and 6 percent
- A dividend that has grown by at least 5 percent annually over the past five years
- A positive total return over the past five years
| Company (ticker) | Dividend yield | Dividend growth over 5 years | Total return over 5 years |
|---|---|---|---|
| Data from Charles Schwab as of January 9, 2024 | |||
| National Storage Affiliates Trust (NSA) | 5.5% | 15.6% | 85.3% |
| Crown Castle (CCI) | 5.5% | 8.9% | 23.4% |
| Four Corners Property Trust (FCPT) | 5.5% | 6.5% | 17.1% |
| CareTrust REIT (CTRE) | 5.1% | 8.3% | 43.8% |
| Alexander & Baldwin (ALEX) | 4.8% | 32.6% | 9.9% |
| Lamar Advertising (LAMR) | 4.8% | 7.2% | 77.5% |
| Real Estate Agreement (ADC) | 4.7% | 7.0% | 28.4% |
The table above contains stocks with high – but not too high – dividends and a record payout over the past decade. That combination means you can get a solid dividend now and it can grow over time. These stocks have all delivered positive total returns over the past five years, so you won’t have to suffer any capital loss either.
The list excludes some of the highest REIT yields on the market, because that’s usually a signal that the payout is unsustainable and destined to fall. So if you factor in a record of booming payouts, you can weed out the high-yielding REITs, which may be on the verge of plummeting.
Should you invest in the best dividend REITs?
Whether REITs are right for you depends on a number of factors, one of the biggest of which is your need for current income. If you don’t need dividend income, you may be giving up potential returns. That’s because dividends are taxable unless you hold them in a tax-advantaged account, such as an IRA. These taxes slow down your ability to grow your wealth.
By contrast, investing in growth stocks – which typically pay little or no dividends – may allow you to accumulate wealth faster by avoiding dividends and the associated income taxes.
Furthermore, when investing in individual stocks, you need to do research to understand the company, its financial profile, its opportunities, and its profit potential. So stocks can require a lot of time investment, but they can also be extremely rewarding.
But if you don’t have the time or inclination to do that kind of work, investing in an index fund can be an attractive option. The best REIT ETFs let you buy a diversified collection of companies that pay an attractive dividend – without the hassle of analyzing individual stocks. This diversification reduces your risk, while still allowing you to achieve an attractive return.
In short
By following the most popular REITs, you can find companies that are poised to thrive in the future. But it’s crucial that you don’t just buy REITs without researching and analyzing them. You need to carefully understand the investment case and why REITs make sense for you.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.
