Investors looking to generate higher levels of income from their investment portfolios should take a look at Real Estate Investment Trusts, or REITs. These are companies that own real estate properties and lease them to tenants, which generates a steady stream of income. The bulk of their income is then passed on to shareholders, through dividends. You can see all 171 REITs here.

The beauty of REITs, for income investors, is that they are required to distribute 90% of their taxable income to shareholders annually, in the form of dividends. In return, REITs typically do not pay corporate taxes. As a result, many of the 171 dividend-paying REITs we track offer high dividend yields of 5%+.

But not all high-yielding stocks are automatic buys. Investors should carefully assess the fundamentals to ensure the high yields are sustainable. This article will discuss 10 of the highest-yielding REITs around, with market capitalizations above $1 billion. The list excludes mortgage REITs, which have their own unique risk factors. Some of the REITs presented here are high-quality businesses worthy of further consideration, while others should be avoided.

High-Yield REIT No. 10: EPR Properties

• Dividend Yield: 7.1%

EPR Properties (EPR) invests in three types of real estate—entertainment, recreation, and education. A few examples of the company’s properties include movie theaters, bowling alleys, dining, shopping, ice skating, golf entertainment, ski areas, public charter schools, and private schools. The total portfolio consists of over 400 locations, with a cumulative value of approximately $6.8 billion.

EPR Properties has differentiated its holdings by pursuing properties that offer an experience. While many other types of brick-and-mortar real estate are struggling right now, entertainment and educational properties are still seeing strong traffic, thanks in large part to younger generations like Millennials.

The end result is that EPR Properties has a diversified portfolio that has enjoyed steady growth for many years, with low levels of lease expirations.

Source: 2018 Investor Presentation, page 12

The company’s focused portfolio has yielded strong results in recent years. In the past five years, total revenue and funds-from-operation (FFO) per share increased 14% and 7% per year, on average. In the 2018 first quarter, revenue and adjusted FFO-per-share increased 20% and 6%, respectively, from the same quarter a year ago.

EPR Properties pays a monthly dividend of $0.36 per share, which works out to $4.32 per share on an annual basis. The most recently monthly dividend payout represented a 6% increase from the same monthly dividend last year, and the company has increased its dividend for eight years in a row.

EPR Properties has an investment-grade credit rating of BBB- from Standard & Poor’s, with a target leverage ratio of 4.6x-5.6x. These metrics are in-line with the broader REIT industry. The company’s balance sheet should hold up if interest rates rise moving forward. Approximately 80% of EPR Properties’ debt is fixed-rate, and the company has no significant maturities until 2022.

EPR Properties has a secure dividend, with a payout ratio of 86%. The company is also growing FFO at a strong rate, which should lead to future dividend increases. These qualities make EPR Properties an attractive high-yield REIT.

High-Yield REIT No. 9: Kimco Realty 

• Dividend Yield: 7.4%

Kimco (KIM) operates in the commercial real estate industry. It is one of the largest owners of shopping centers, with an owned interest in 475 U.S. shopping centers as of 3/31/18. The properties are focused primarily on large cities. Kimco’s property portfolio has enjoyed rising occupancy and rents over the past several years.

Source: 2018 Investor Presentation, page 14

On 4/26/18 Kimco reported strong first-quarter financial results. FFO-per-share increased 5.4% for the quarter, driven by higher occupancy and higher rents. Occupancy increased 80 basis points to 96.1%. Rental rates for new leases rose 15.6%, while those for renewals increased 7.3% for the quarter.

Kimco is looking to property acquisitions to fuel growth. However, the company will still be weighed down, at least in part, by tenant difficulties. Some of its retail tenants include Sears (SHLD), Kmart, and JC Penney (JCP), all of which are in very challenged financial condition, and are likely to continue closing stores.

Fortunately, new openings from Kimco’s more successful tenants more than offset the store closures. The company expects more than 3,000 net new store openings in 2018.

Source: 2018 Investor Presentation, page 6

Kimco will continue to sell under-performing properties to raise cash to pay off debt and reinvest in other locations. For example, during the first quarter Kimco disposed of 21 shopping centers for proceeds of $210 million.

These efforts have worked well for the company, as Kimco has a stronger balance sheet than many other commercial REITs. Kimco has a credit rating of BBB+, and an average debt maturity of 10.7 years. In addition, Kimco expects FFO-per-share of $1.42 to $1.46 for 2018. With an annual dividend of $1.12 per share, Kimco is likely to have a payout ratio below 80% for 2018, which indicates a sustainable dividend.

High-Yield REIT No. 8: Geo Group 

• Dividend Yield: 7.7%

Geo  (GEO) operates a diversified portfolio of correctional, detention, and residential treatment facilities. It provides these services to government agencies around the world. The company has operations in the United States, Australia, South Africa, and the United Kingdom. Geo owns and/or manages a total of 141 facilities.

Source: Earnings Presentation, page 3

Geo has grown at a high rate over the past three years. From 2015-2017, total revenue and adjusted FFO-per-share increased 10.8% and 6.7% per year, respectively.

On 4/26/18, Geo Group reported first-quarter earnings. Total revenue of $564.9 million rose 2.6% from $550.6 million in the same quarter a year ago. FFO-per-share, as adjusted, declined 12% to $0.57. The FFO decline was due primarily to a higher income tax payment and lower interest income.

The company believes its shares are currently undervalued, which is why it repurchased over 1.8 million shares of common stock in the first quarter, for approximately $40.0 million.

For 2018, Geo expects total revenue of approximately $2.3 billion. Revenue is expected to increase 1.6% this year. Geo also expects full-year 2018 adjusted FFO-per-share to be in a range of $2.45 to $2.53, which represents a decline of 0.8% to 3.9%. This is a mild decline, and the company is coming off of a multi-year period of growth.

Despite the forecast for FFO to decline in 2018, Geo appears to have a secure dividend. The annualized payout of $1.88 per share represents a 2018 payout ratio of 74% to 77%.

High-Yield REIT No. 7: Vereit Inc. 

• Dividend Yield: 7.8%

Vereit (VER) owns and manages a portfolio of single-tenant commercial properties in the United States. The portfolio includes approximately 4,100 properties and 94.4 million square feet. Vereit provides equity capital to corporations in return for long-term leases on their properties. It has roughly 650 tenants spanning 43 different industry groups.

Vereit’s tenants consist of various businesses, including restaurants, retailers, office, and industrial properties. Searching through the list of tenants reveals several highly established businesses, including Red Lobster, Walgreens, Dollar General, CVS, FedEx, Amazon, and Home Depot.

Source: Investor Presentation, page 12

On 5/4/18, Vereit reported first-quarter results. Total revenue declined 1.8% from the same quarter a year ago, due to portfolio dispositions. Fortunately, the company had a high occupancy rate of 98.7% for the quarter. Adjusted FFO-per-share increased 2.1% year-over-year.

For 2018, Vereit expects to generate same-store rental growth of 0.3% to 1.0%. It is a good sign that the company can still pass through rental increases each year, which helps grow revenue and demonstrates strength in the underlying property portfolio. Adjusted FFO-per-share is expected in a range of $0.70 to $0.72, which more than covers the annual dividend payout of $0.55 per share.

However, rising interest rates are a considerable risk factor for Vereit going forward. Vereit has a fairly high net-debt-to-EBITDA ratio of 5.7x, which the company expects to increase to 6.0x over the course of 2018. Its debt has a weighted average remaining term of 4.1 years, which means rising interest rates could result in higher financing costs moving forward. Investors should monitor the company’s future financial results, to make sure debt remains manageable.

High-Yield REIT No. 6: Kite Realty Group 

• Dividend Yield: 8.4%

Kite Realty Group Trust (KRG) is a full-service, vertically integrated REIT that focuses primarily on shopping centers. It has 119 properties with a lease rate of 94.8%. The company has targeted top destination locations, which offer consumers a differentiated experience. Just a sample of its top tenants includes TJ Maxx, Publix, Petsmart, and Lowe’s.

Kite Realty believes this strategy will help protect it from the onslaught of e-commerce growth. According to the company, 54% of its properties are “Internet-resistant”.

Source: 2018 Investor Update, page 5

For the 2018 first quarter, FFO-per-share was flat at $0.51. The company generated 1.5% growth of same-property net operating income, but this was offset by higher expenses and shares outstanding. Future growth will be derived primarily from property redevelopments.

Last quarter, Kite Realty completed construction on one major redevelopment project, the Burnt Store Marketplace in Punta Gorda, Florida. The company invested $8.9 million into this asset to demolish and rebuild the 45,000 square-foot Publix, and it upgrade the center for a projected annualized return of 11.5%. Kite Realty’s total redevelopment program currently includes six projects under various stages of construction, with estimated combined costs ranging from $61.5 to $66.5 million and an estimated combined annualized return ranging from 8.0% to 9.0%.

For 2018, Kite Realty expects FFO-per-share in a range of $1.98 to $2.04. With a current dividend payment of $1.27 per share, Kite Realty is likely to have a payout ratio of 62% to 64% this year, which indicates a sustainable dividend. Kite Realty also has an investment-grade credit rating of BBB-, which provides additional support to the dividend payout.

However, the company has a net-debt-to-EBITDA ratio of 6.76x. Investors should closely monitor Kite Realty’s results in future quarters to ensure the company has a plan to reduce debt.

High-Yield REIT No. 5: Lexington Realty Trust

• Dividend Yield: 8.5%

Lexington Realty Trust (LXP) specializes in single-tenant, net-leased industrial and office properties. The company’s portfolio consists of 168 properties in 37 U.S. states, 97.2% of which are leased. Leases are long-term, typically 7-20 years in duration.

Source: 2018 Investor Presentation, page 8

The company focuses on industrial and office properties specifically, and it is easy to see why. The economics of industrial and office properties are sound. These properties are not in danger from the broader downturn affecting the retail space right now.

Approximately 97.7% of Lexington’s industrial properties are leased, with an average lease term of 10.4 years. And, 66% of Lexington’s industrial properties have built-in annual rent increases. Occupancy of office properties is even higher, at 99.1%, with 68% of properties holding annual rental increases. This has resulted in stable and predictable cash flows for the overall portfolio.

Source: 2018 Investor Presentation, page 15

The strategy has worked well for the company. Lexington reported first-quarter revenue and FFO-per-share growth of 6.8% and 8.7%, respectively, from the same quarter last year. Growth was primarily attributable to revenue generated from 2017 property acquisitions and new leases.

Lexington has an attractive dividend yield of 8.5%, and the company has paid dividends for 24 consecutive years. The balance sheet is in relatively good shape, with an investment-grade credit rating, but the company has a high level of debt, with a net-debt-to-adjusted-EBITDA ratio of 6.1x. If the company can lower its debt burden moving forward, there is a good chance the dividend can be maintained. Lexington has a FFO payout ratio of 71%, which is fairly low for a REIT.

High-Yield REIT No. 4: Omega Healthcare Investors 

• Dividend Yield: 8.9%

Omega Healthcare Investors (OHI) is a healthcare REIT that generates 83% of its revenues from its skilled nursing facilities and 17% of its revenues from senior housing. The company operates ~1,000 properties in 42 U.S. states and the United Kingdom. It leases these properties to 77 independent operators.

Source: 2018 Investor Presentation, page 5

2017 was a difficult year for Omega, as it dealt with eroding performance at a key tenant. Adjusted Funds from Operation (FFO) declined 3.5% for 2017. The company reported $198 million in impairment charges last year, due to problems related to two tenants, most notably Orianna Health Systems.

Omega’s fundamental performance worsened to start 2018, with a 9.3% decline in adjusted FFO-per-share in the first quarter. On 3/7/18, Omega announced that Orianna will pursue a significant restructuring, which includes certain affiliates of Orianna declaring Chapter 11 bankruptcy.

While this is certainly a concerning development, it is not unexpected. Omega reiterated that its rental yields remain within expectations. Furthermore, the company does not believe the bankruptcy filing materially affects the fair value of the facilities in question.

The company is in the process of transitioning 23 related facilities to new operators, and Omega has received approval for solicitation of competing proposals for the sale or restructuring of the 19 remaining Omega facilities currently operated by Orianna. Omega has also reiterated 2018 FFO guidance, and it does not expect further impairments in 2018 resulting from the bankruptcy filing.

The growth catalyst for Omega Healthcare is the aging U.S. population. The size of the elderly population, relative to other age groups, is large and growing.

Source: 2018 Investor Presentation, page 14

According to the U.S. Census Bureau, there are 10,000 Baby Boomers turning 65 every day. The sheer size of the Baby Boomer generation will place a great strain on the healthcare industry to meet demand. As a result, senior housing and medical facilities should enjoy rising demand and spending from the aging population.

Omega’s FFO growth has taken a hit in recent periods due to tenant issues, but the long-term growth trajectory remains intact. In the meantime, investors can receive a very high dividend yield for being patient. Omega expects to have a dividend payout ratio of 88% in 2018. It also has a strong balance sheet, with an investment-grade credit rating and no material debt maturities until 2022.

High-Yield REIT No. 3: Senior Housing Properties Trust

• Dividend Yield: 9.2%

Similar to Omega Healthcare, Senior Housing Properties Trust  (SNH) is a healthcare REIT, also with a struggling core tenant. Senior Housing Properties specializes in senior care facilities, such as senior housing, skilled nursing, medical offices, and laboratory facilities. It owns approximately $8.5 billion of properties with 700 tenants.

Source: 2018 Investor Presentation, page 10

Senior Housing Properties shares have declined over 20% in the past 12 months. The company’s problems stem from its significant exposure to Five Star Living (FVE), which operates senior living communities. Five Star makes up more than 25% of Senior Housing Properties’ income, although that exposure has decreased substantially in recent years.

Still, the impact has been felt by Senior Housing Properties. FFO-per-share declined 16% in 2017. Performance improved to start 2018, with FFO-per-share declining by just 2.2% in the first quarter. Senior Housing Properties continues to prune its portfolio by selling off under-performing assets. Since the beginning of 2017, the company sold $812 million of assets and utilized the proceeds to pay down debt and spend $307 million on new property acquisitions.

Going forward, Senior Housing is focusing on medical office buildings and senior living, both of which are growth categories.

Source: 2018 Investor Presentation, page 6

According to the company, by 2030 there are expected to be 71 million seniors living in the U.S., representing nearly 20% of the population. In addition, senior housing has a supply constraint, as demand continues to outpace available supply in many regions of the country. Occupancy at managed senior living communities was 85.8% for the first quarter, while occupancy at medical office buildings was 94.9%.

Senior Housing Properties appears to have a secure dividend, with a trailing twelve-month payout ratio of 86%. The company also has an investment-grade credit rating of BBB-, which will help keep its cost of capital contained moving forward. If Senior Housing Properties can stabilize FFO and return to growth, the dividend is likely to be maintained.

High-Yield REIT No. 2: Global Net Lease Inc.

• Dividend Yield: 11.1%

Global Net Lease (GNL) is a triple net lease real estate investment trust that operates in many of the most important global economies, including the United States and various countries in Europe. It has 327 properties, leased to 103 tenants across 41 various industries.

The property portfolio is 99.5% leased, with an average remaining lease term of 8.6 years, and approximately 78% of lease rent is derived from investment-grade tenants. Many of Global Net Lease’s top tenants are strong businesses with growth potential.

Source: 2018 Investor Presentation, page 5

Global Net Lease’s first-quarter core FFO-per-share declined 5.8% year over year, due to higher depreciation, interest, and operating expenses. FFO-per-share declined 18% in 2017, which is a significant concern.

Global Net Lease’s future growth will be based largely on acquisitions of new properties. On 5/17/18, the company closed on five industrial property acquisitions, for $83 million. The acquisitions are part of the company’s previously-announced plan to conduct $293 million of property acquisitions this year. The properties have an average remaining lease term of 10 years, and the acquisitions will help expand Global Net Lease’s position in Midwest industrial properties.

That said, the acquisition spree comes at a cost, which is a very high level of debt. The company has a net-debt-to-adjusted-EBITDA ratio of 7.4x. A leverage ratio above 7.0 is a red flag, particularly if the U.S. economy enters a rising-rate environment. Global Net Lease has taken steps to reduce its debt costs. The company has a weighted average interest rate of just 2.8% on its debt.

The dividend is also questionable because of a rising payout ratio. Global Net Lease has a current annual dividend of $2.13 per share, but the company generated just $2.10 per share of FFO in 2017. Investors should be aware that this is a highly-leveraged company, which puts the dividend at risk if the fundamentals deteriorate moving forward.

High-Yield REIT No. 1: Washington Prime Group 

• Dividend Yield: 13.3%

Washington Prime Group (WPG) was spun off from Simon Property Group (SPG) in 2014, and since then the results haven’t been pretty. It initially began trading as a publicly-owned company at a share price of $20, but the stock has steadily traded lower to its current level of $7.60 per share. It is easy to see why—Washington Prime Group is a large mall owner, at a time when malls are dying.

The REIT’s assets are distributed across the U.S., with a higher concentration of malls on the East Coast, in Florida and the Mid-West.

Washington Prime Group’s adjusted FFO-per-share declined 8.4% in 2017. Occupancy fell a full point in 2017, to 93.1%. Conditions did not improve much to start 2018. First-quarter FFO-per-share declined 7.1% from the same quarter a year ago.

Going forward, Washington Prime Group is lowering its exposure to under-performing retail segments. Collectively, the portfolio of weak properties is referred to as Tier Two, which will account for only 10% of the company’s operating income in 2018. In turn, Washington Prime Group is focusing heavily on redevelopment of its stronger Tier One assets to fuel growth.

Source: Citi Global Property Conference, page 15

With a high level of exposure to malls and a dividend yield well above 10%, it appears all signs point to a dividend cut for Washington Prime Group. Indeed, if the company’s FFO does not reverse course from the recent declines, a dividend cut is likely. However, Washington Prime still generates lots of cash flow, which could allow the dividend to survive. Management reiterated guidance for 2018 FFO in a range of $1.48 to $1.56 per diluted share. With an annualized dividend payment of $1.00 per share, Washington Prime Group is likely to have a dividend payout ratio of 64% to 67%.

In addition, Washington Prime Group’s debt metrics are sound. The company has an investment-grade credit rating, and 91% of its debt is fixed-rate, which will help mitigate the risk of rising interest rates. To be sure, Washington Prime Group’s high yield carries significant risk, if the fundamentals continue to deteriorate. But if the state of U.S. malls begins to improve, it could be a rewarding dividend stock.