Real Estate Stocks to Buy in 2017
Investing in real estate can be rewarding to income investors. But you don’t really need to be a landlord to collect rent. There are plenty of real estate stocks on the market that can provide investors with a steady stream of income without the hassle of buying and renting out properties.
Today, most real estate dividend stocks are organized as real estate investment trusts, or REITs. To income investors, the biggest advantage of investing in REITs is their dividend yield. Right now, the average yield of all S&P 500 companies is about two percent. With REIT stocks, the dividend yield could easily double or triple that. And that’s because these companies are required by law to distribute at least 90% of their taxable income each year as dividends to shareholders.
Moreover, real estate stocks could also be more solid than other high-yield stocks on the market today. This is because REITs are backed by real estate. Their payouts are secured by stable rents from long-term leases. They could be expanding, but they are not taking on excessively risky projects.
Right now, there are hundreds of real estate stocks on the market. They offer investors exposure to different segments in real estate. Some specialize in shopping malls and freestanding retail, while others invest in office buildings and multi-family apartment buildings. There are also healthcare REITs, which invest in the real estate of nursing facilities, retirement homes, and medical offices.
As you can see, REITs give investors an opportunity to tap into certain areas of the real estate market that are usually off-limits to small investors. For instance, most individual investors would not be able to buy a shopping center directly. However, by investing in a REIT stocks that specializes in malls and shopping centers, an investor can easily become a part owner of those properties. For REITs, the minimum investment required is usually a few thousand dollars.
And then there are the benefits of liquidity. Buying and selling properties involves high expenses. Sometimes it could take weeks or even months before a property is sold. But by investing in real estate stocks, you can buy and sell any time you want because they are listed on the stock exchanges.
Below is a list of what I believe to be the best real estate dividend stocks to watch in 2017.
Real Estate Stocks List
| Company Name | Stock Symbol | Dividend Yield |
| Realty Income Corp | O | 4.09% |
| EPR Properties | EPR | 5.36% |
| Welltower Inc | HCN | 5.16% |
| Omega Healthcare Investors Inc | OHI | 7.58% |
| Brookfield Property Partners L.P. | BPY | 5.06% |
| Government Properties Income Trust | GOV | 8.74% |
| Education Realty Trust, Inc. | EDR | 3.62% |
| LTC Properties Inc | LTC | 4.89% |
| Select Income REIT | SIR | 7.92% |
| PS Business Parks Inc | PSB | 2.55% |
1. Realty Income Corp
Realty Income Corp (NYSE:O) brands itself as “The Monthly Dividend Company.” It is a real estate investment trust founded in 1969. The company purchases commercial real estate to tenants under long-term net lease agreements, generally 10 to 20 years. Realty Income uses the lease payments to provide investors with predictable monthly dividends.
The company made its first acquisition—a Taco Bell restaurant—in early 1970. Today, it owns more than 4,700 properties located throughout 49 states and Puerto Rico.
Realty Income’s portfolio is well diversified, with 247 commercial tenants operating in 47 industries. By the end of the third quarter of 2016, properties leased to investment-grade-rated tenants account for approximately 45% of Realty Income’s total annualized rental revenue.
The most impressive part about Realty Income Corp is its ability to provide consistently growing dividends. Since the company was listed on the New York Stock Exchange (NYSE) in 1994, it has raised its dividends 89 times. While companies like to boast how they increase their dividends every year, Realty Income has done something much more impressive: raise its dividends every quarter for the past 77 quarters. Since the company became public, it has achieved a compound average annual dividend growth rate of approximately 4.6%. (Source: “Monthly Dividend Commitment,” Realty Income Corp, last accessed January 10, 2017.)
Right now, the company pays $0.2025 per share on a monthly basis, translating to an annual dividend yield of 4.09%.
2. EPR Properties
Traditionally, investors of real estate stocks have two choices: to invest in a highly diversified REIT or a highly specialized one. However, there is one real estate dividend stock that allows investors to have the benefits of both: EPR Properties (NYSE:EPR). The company maintains a specialized orientation, complemented by diversification across and within segments.
EPR Properties is a real estate trust was founded in 1997 and is headquartered in Kansas City, Missouri. Today, it has an investment portfolio of over $5.0 billion. The company has three primary investment segments: entertainment, recreation, and education. EPR Properties currently has over 290 locations spread across 41 states, with over 250 tenants.
The company calls itself a “diversified specialist.” As of September 30, 54% of EPR Properties’ net operating income comes from its entertainment segment. Education accounts for 24%, recreation accounts for 20%, and the remaining two percent comes from its “other” segment. (Source: “NOI Breakdown,” EPR Properties Real Estate Trust, last accessed January 10, 2017.)
EPR Properties stands out when it comes to returning value to shareholders. The company pays monthly dividends, which is a great thing for income investors. It has also raised its payout in each of the last six years at an average annual rate of seven percent. Right now, EPR Properties has a monthly dividend rate of $0.32 per share, translating to an impressive annual dividend yield of 5.36%. (Source: “Dividends,” EPR Properties Real Estate Trust,” last accessed January 10, 2017.)
3. Welltower Inc
Welltower Inc (NYSE:HCN) is a real estate investment trust that mostly invests in senior housing, assisted living and memory care communities, post-acute care facilities, and medical office buildings. Trading at $66.63 per share at the moment, the company has an annual dividend yield of 5.16%.
The main reason why investors shy away from many high-dividend stocks is the concern that those dividends might not be sustainable. But that shouldn’t be the case for Welltower. This is because Welltower is a healthcare REIT. The demand for healthcare is relatively inelastic to how the overall economy is doing. People might not be buying a lot of new cars when the economy enters a downturn, but those that need long-term care would most likely go and get it. That is, Welltower could provide recession-proof income for dividend investors. Over the past five years, the company’s quarterly dividend rate has increased by over 20%. (Source: “Dividend History,” Welltower Inc, last accessed January 10, 2017.)
4. Omega Healthcare Investors Inc
Speaking of healthcare REIT stocks, here’s another one: Omega Healthcare Investors Inc (NYSE:OHI).
Omega Healthcare Investors is a REIT that invests in and provides financing to the long-term care industry. Ninety percent of its portfolio consists of skilled nursing facilities, while the other 10% is assisted living facilities. The company has over 1,000 locations spread across 42 U.S. states and the U.K. (Source: “Our Approach,” Omega Healthcare Investors Inc, last accessed January 10, 2017.)
As a real estate dividend stock, Omega Healthcare Investors’ dividends stand out. Paying $0.61 per quarter, the company has an annual dividend yield of 7.58%. From 2005 to 2015, Omega Healthcare Investors was the top healthcare REIT for total shareholder returns.
5. Brookfield Property Partners LP
Brookfield Property Partners LP (NYSE:BPY) is a REIT that owns, operates, and develops one of the largest portfolios of office, retail, multifamily, industrial, hospitality, triple net lease and self-storage assets.
Brookfield owns 149 office properties, totaling 101-million square feet, in gateway markets around the world. It also has 10-million square feet of core office and multifamily development projects currently underway. Through its 34% stake in General Growth Properties Inc (NYSE:GGP), Brookfield also gets exposure to 126 retail properties in the U.S. totaling 124-million square feet.
At its current price, Brookfield Property Partners has an annual dividend yield of 5.06%. Going forward, the company is targeting annual distribution growth of five to eight percent.
6. Government Properties Income Trust
For dividend investors, there are plenty of office REITs to choose from. This one, however, is a bit different, because its tenant is “Uncle Sam.”
This real estate dividend stock is Government Properties Income Trust (NASDAQ:GOV), the largest landlord of the United States government. Their REIT owns 71 properties for a total of approximately 11-million square feet, with locations in 31 states, as well as Washington D.C.
The majority of the company’s properties are office buildings. By the end of November 2016, Government Properties Income Trust’s properties are 95% leased. Around 92% of its annualized rental income is paid for by the U.S. Government, with 37 agencies footing the bill; 13 state governments; and three other government tenants. (Source: “About Us,” Government Properties Income Trust, last accessed January 10, 2017.)
Government Properties Income Trust has a very impressive dividend yield of 8.74%. While not all high-yield stocks are good investments, this real estate dividend stock is worth owning for income investors.
The reason is that the company has a strategic focus on government agencies. Approximately 90% of Government Properties Income Trust’s rental revenue is generated from investment-grade tenants. Moreover, government tenants tend to remain place significantly longer than those in the private sector. For instance, U.S. government tenants have historically occupied the same space for more than 20 years.
7. Education Realty Trust, Inc.
Other than retail REITs, office REITs, and healthcare REITs, there are real estate stocks specializing in other areas, such as education.
Education Realty Trust, Inc. (NYSE:EDR) is a self-administered and self-managed REIT that owns and/or manages 86 communities, serving 53 universities in 24 states via over 44,000 beds. (Source: “EdR Overview,” Education Realty Trust, Inc., last accessed January 10, 2017.)
Note that university enrollment has been growing, which is a good thing for EDR, a company that makes money by providing housing for students. Education Realty Trust focuses on high-demand universities with a 1.9-times application-to-admittance ratio. Moreover, 82% of its beds serve universities with over 20,000 people enrolled.
Paying $0.38 per share on a quarterly basis, this real estate dividend stock has an annual yield of 3.62%.
8. LTC Properties Inc
One benefit of investing in real estate stocks is that some of them pay dividends on a monthly basis. I mean, you have to pay bills every month, why wait a quarter to collect dividends?
LTC Properties Inc (NYSE:LTC) is a REIT that specializes in seniors housing and healthcare properties. Its portfolio consists of over 200 assisted living, memory care, post-acute/skilled nursing, and range-of-care properties in 30 states, also having 35 operating partners. (Source: “Building Long-Term Value,” LTC Properties Inc, last accessed January 10, 2017.)
Since becoming a public company in 1992, LTC Properties has been focusing on delivering strong shareholder returns.
The company switched from paying quarterly dividends to monthly dividends in 2005. Since then, LTC stock’s monthly payout has increased by 72.7%. Note that even during the Great Recession, the company did not cut its dividends.
Right now, LTC Properties pays $0.19 of monthly dividends per share, translating to an annual dividend yield of 4.89%.
9. Select Income REIT
Some say that rather than investing in real estate stocks, you can just buy a property and be a landlord yourself. The thing is, there are properties that are usually off-limits to small investors, such as industrial properties and corporate headquarters.
That’s when REITs can really help. For instance, by investing in Select Income REIT (NASDAQ:SIR), retail investors like you and I can own a part of a huge portfolio of industrial properties. In aggregate, Select Income REIT owns 120 properties containing 44.8 million square feet that are 98.6% leased for a weighted average lease term of about 10 years. The company’s properties are located in 35 states and the average age of its building is only 12 years.
Select Income REIT pays quarterly dividends with a quite handsome dividend yield of 7.92%.
10. PS Business Parks Inc
PS Business Parks Inc (NYSE:PSB) is a full-service real estate company with expertise in leasing, property management, acquisition, and development. It owns and operates approximately 28.2 million rentable square feet of commercial space located in California, Florida, Maryland, Texas, Virginia, and Washington.
The company specializes in “office/warehouse” properties that can be easily made to fit the needs of tenants. It has over 4,900 customers, and since the company’s founding in 1998, its total square footage has grown by 560%.
PS Business Parks has a quarterly dividend rate of $0.75 per share, translating to an annual yield of 2.55%.