Image Source: Unsplash

Investors looking for high dividend yields often turn to more defensive sectors. These include dividend favorites such as consumer staples, utilities, and healthcare. But a sector that has consistently provided strong yields is that of real estate investment trusts or REITs.

REITs exist virtually entirely to generate income that is then substantially completely returned to shareholders via dividends. In this way, REITs can be an excellent way to generate passive streams of income.

In this article, we’ll look at three high-yield REITs that we like for their very strong current dividend yields.

W.P. Carey (WPC)

W.P. Carey is a commercial real estate-focused REIT that operates two segments: real estate ownership and investment management. The REIT operates more than 1,200 single-tenant properties on a net lease basis, across the US and Northern and Western Europe. W.P. Carey was founded more than 40 years ago and is headquartered in New York, NY.

For its fiscal first quarter, W. P. Carey reported that its revenues totaled $428 million, which was 23% more than the revenues that W. P. Carey generated during the previous year’s period. Revenues came in well above the analyst consensus estimate, beating it by a strong $22 million.

During the first quarter, the trust was more profitable than what the analyst community expected, as funds-from-operations came in at $1.31 on a per-share basis, which was $0.04 more than the analyst consensus. Funds-from-operations were down by 3% on a per-share basis compared to the previous year’s quarter.

W. P. Carey has updated its guidance for 2023, forecasting funds from operations in a range of $5.30 to $5.40 on a per-share basis, which means a small improvement versus 2022 at the midpoint of the guidance range.

W. P. Carey has increased its dividend for 28 consecutive years. WPC stock yields 6.4%.

Digital Realty (DLR)

Digital Realty Trust is a leader in buying and developing properties for technological uses. Digital Realty’s properties are a combination of data centers that store and process information, technology manufacturing sites and Internet gateway datacenters which allow major metro areas to transmit data. The company operates over 300 facilities in 27 countries on 6 continents.

On July 27th, 2023, Digital Realty reported second quarter 2023 results for the period ending June 30th, 2023. For the quarter, Digital Realty’s revenue came in at $1.4 billion, a 20% increase compared to Q2 2022. During the quarter, the company generated $1.68 in core FFO per share compared to $1.72 per share prior.

Subsequent to the second quarter, Digital Realty created a joint venture with GI Partners for the sale of a 65% interest in two stabilized hyperscale data center buildings in Chicago, which earned DLR $743 million of gross proceeds and it holds the remaining 35% interest in the JV. Additionally, DLR created a JV with TPG Real Estate for the sale of an 80% interest in three stabilized hyperscale data center buildings in Northern Virginia, which earned DLR $1.3 billion of gross proceeds, while it continues to hold the remaining 20% interest in the JV.

Digital Realty also updated its 2023 guidance, and now anticipates $5.5 billion to $5.6 billion (unchanged) in revenue and $6.55 to $6.65 (down from $6.65 to $6.75) in core FFO.

In 2022 Digital Realty declared a $1.22 quarterly dividend, marking a 5% increase and the company’s 17th straight year of increasing its payout. The stock currently yields 4.0%.

Healthpeak Properties (PEAK)

Healthpeak Properties is the largest healthcare REIT in the U.S., with 626 properties. It was the first healthcare REIT that was included in the S&P 500. The REIT invests in life science facilities, senior houses, and medical offices, with 97% of its portfolio based on private-pay sources. It has a market capitalization of $12 billion.

Healthpeak Properties posted declining FFO for six consecutive years, until 2022. The REIT ran into trouble in 2015, when a major tenant was sued for Medicare claims fraud. As a result, the REIT incurred a $1.3 billion asset impairment charge and has been going through a major restructuring. However, Healthpeak Properties has sold several assets and has used the proceeds to reduce its debt. As a result, the REIT has received credit rating upgrades from S&P and Fitch (to BBB+) as well as Moody’s (to Baa1).

In the 2022 second quarter, FFO of $0.45 beat analyst estimates by $0.02, while revenue of $545.43M beats by $9.15 million. Revenue increased 5.3% year-over-year. Blended Total Same-Store Portfolio Cash (Adjusted) NOI growth was 4.8% for the quarter.

The REIT has begun to recover from the pandemic, which has subsided. We also expect the trust to enter a sustainable growth trajectory, as it will leave its past issues behind. Overall, we expect 6.0% average annual growth of FFO per share for the next five years off this year’s low comparison base.

With a dividend payout ratio of roughly 70% expected for 2023, the current dividend payout appears secure. PEAK shares currently yield 5.7%.

More By This Author:

3 Alcohol Stocks For Reliable Growth And Dividends
3 Dividend Kings With Recession-Proof Payouts
10 Safest Dividend Kings For 2023