10 Best REIT Stocks with High Dividend Yields

Fatima Farooq
11 min read

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In this article, we will be looking at the 10 best REIT stocks with high dividend yields. To skip our detailed analysis of REIT stocks, you can go directly to see the 5 Best REIT Stocks with High Dividend Yields.

According to a 2021 outlook report from National Association of Real Estate Investment Trusts, or NAREIT, this year, REITs alongside commercial real estate are set to begin healing from the wounds opened by the coronavirus pandemic, particularly in light of vaccine distribution and effectiveness.

In 2020, the REIT industry saw a number of challenges like rising vacancy rates and falling rents. For instance, the vacancy rates in offices rose 80 bps from 9.9% in the first quarter to about 10.7% in the third quarter, and it is estimated that these rates will rise this year and in early 2022. As demand in the office, apartment, retail, and industrial sectors also fell, rent growth decreased in pursuit, with retail property rents declining by 0.6% quarter-on-quarter last year, for example. Yet despite all this, REITs are among the few players that managed to remain strong in the face of the pandemic, largely because of strengthened financial positions that also allowed them to raise about $460 billion in common equity capital from 2009 to 2020. And while the above mentioned factors and lockdown impositions had resulted in losses for the REIT industry, with fund from operations (FFO) falling by 23.5% in the second quarter of 2020, the industry was able to stabilize in the third quarter, when FFO rose by 5.6%.

In light of the recovery, REITs are beginning to regain investor confidence. A research study titled Private Equity Real Estate Fund Performance: A Comparison to Listed REITs and Open-end Core Funds, has also offered data to back up the claim that investing in REITs can be more profitable for investors by offering higher returns than investing in private equity real estate (PERE) funds. The study's data set was made up of about 375 US and 255 international PERE closed end funds, and it found that in America, REIT returns surpassed risk-adjusted returns of PERE funds by about 590 basis points, and won around 68% of the matchups based on risk adjustment. Globally, REIT returns again surpassed those of PERE funds by 619 basis points on average, and beat 68% of the global PERE funds.

To add the cherry on top of the cake, it should be noted that REITs are significant contributors to the US economy. In 2019 alone, the REIT industry created about 2.6 million full-time or equivalent jobs while also generation about $173.3 billion in labor income. Moreover, the distribution of dividends from REIT stocks, as well as interest payments to investors, also supported around 489,000 jobs while generating $30.3 billion in labor income for that year. Thus, it can be rightly said that REITs are some of the biggest contributors to the US economy, while also remaining attractive investment options. As such, REIT dividend stocks can be considered good investment options like other more stable dividend stocks such as Microsoft Corporation (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL), Visa Inc. (NYSE: V), and NextEra Energy, Inc. (NYSE: NEE).

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