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In an uncertain global economic environment like this, many investors are wondering where they can get safe and reliable income. Treasury yields have risen, but treasuries generally offer weak inflation protection. But when it comes to high-yielding equities, it's far from guaranteed that they all will be able to maintain their dividends during an economic downturn.

Real estate investment trusts, or REITs, could be a good choice in this environment. Their "real asset" business protects investors against inflation, and tax laws demand that they pay out the majority of their (taxable) income, which is why many REITs offer above-average dividend yields.

In this article, we will showcase three REITs that have very reliable and safe dividends.

1: Federal Realty Trust (FRT)

The first one such REIT is Federal Realty Trust (FRT), a retail REIT. The company's footprint is centered on major coastal urban centers, where the high population density results in high demand for retail space. Federal Realty Trust mostly invests in smaller properties in contrast to malls, which is a good thing, as these properties are more resilient versus the e-commerce megatrend, as they are rented out to grocers, dollar stores, pharmacies, and similar resilient businesses.

Federal Realty Trust has shown excellent resilience versus economic downturns in the past. That can be explained by the business model that is not experiencing major headwinds during economic downturns. Even in bad times, consumers need to visit pharmacies, for example. With long-term contracts in place with its tenants, and with those tenants doing okay even during tough times, Federal Realty Trust's has been able to generate very reliable funds from operations in the past.

In the 2023 fourth quarter, revenue of $292 million slightly missed estimates but FFO of $1.64 was in-line. The company generates more than enough cash flow to pay a consistent dividend. Federal Realty has managed to achieve Dividend King status. The company has increased its dividend for an impressive 55 years in a row.

2: Digital Realty (DLR)

Digital Realty is a data center REIT that owns over 300 facilities in 28 countries on 6 continents. The trust has a market capitalization of ~$30 billion.

On October 26th, 2023, Digital Realty reported third quarter 2023 results for the period ending September 30th, 2023. For the quarter, Digital Realty’s revenue came in at $1.4 billion, an 18% increase compared to Q3 2022. During the quarter, the company generated $1.62 in core FFO per share compared to $1.67 per share prior.

During the third 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’s dividend payout ratio (using FFO instead of earnings) is comparatively low for a REIT, which should give shareholders confidence that the dividend is relatively safe. Digital Realty’s chief competitive advantage is that it is among the largest technology REITs in the world.

Digital Realty has increased its dividend for 17 consecutive years. The stock currently yields 3.5%.

3: Essex Property Trust (ESS)

Essex mostly owns multifamily residential units, with most of those being located in urban centers on the West Coast. Essex Property is one of the largest appartment REITs, owning more than 60,000 units.

Essex Property has managed to grow its dividend for 29 years in a row, making it a Dividend Aristocrat. This was possible thanks to the fact that Essex Property's business model is resilient. Demand for housing isn't dependent on the strength of the economy, as everyone needs a place to live, no matter whether there is a recession or an economic boom.

As a result of that, Essex Property has shown excellent resilience in the past. Essex Property has delivered reliable FFO growth, via organic rent increases at existing properties, while acquisitions and new projects also played a role. We believe that there is a high likelihood that Essex Property will continue to deliver solid growth in the long run.

Essex Property currently offers a dividend yield of 4%. With a payout ratio of just 60%, Essex Property has one of the lowest dividend payout ratios among major REITs. Combine the low dividend payout ratio with the REIT's proven resilience and strong dividend track record, and ESS looks like a low-risk pick for safe income.

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