Investing in real estate investment trusts (REITs) that provide yields of 4% or higher can lead to substantial returns, with some offering impressive double-digit growth rates. The strategy is simple: purchase these REITs, maintain your holdings, and reinvest the dividends to maximize your investment potential.
Real estate stands as the most enduring asset class in history—its appeal is timeless and continues to attract investors. However, many individual investors often find themselves lacking the necessary connections, expertise, and financial resources to effectively invest in commercial properties. This is precisely where real estate investment trusts (REITs) come into play. These publicly traded entities acquire and lease real estate assets, distributing at least 90% of their taxable income to shareholders in the form of nonqualified dividends, making them an attractive option for investors seeking consistent income.
As a result, REITs are exceptional choices for those focused on dividend investments. This article highlights three top-tier REITs, each representing a distinct category of real estate. With robust financial performance, a history of reliable dividends, and appealing valuations, these REITs emerge as the best options for anyone looking to invest $1,000 today.
1. Discover Realty Income: The Monthly Dividend Champion
Many dividend investors recognize Realty Income (O -0.46%) as the “monthly dividend company,” due to its unique practice of paying dividends monthly rather than adhering to the conventional quarterly schedule. Realty Income boasts a diverse portfolio of over 15,000 properties throughout the United States and Europe, focusing primarily on net leases for single-tenant retail spaces. This includes a variety of establishments, such as restaurants, retail stores, gyms, pharmacies, and many other businesses.
In recent years, the rise in interest rates has impacted Realty Income’s stock performance, causing its dividend yield to climb to approximately 5.5%, a level not seen in nearly a decade. However, investors shouldn’t be concerned, as the dividend payout ratio stands at a manageable 76% of Realty Income’s projected 2024 funds from operations (FFO). The company has impressively paid and increased its dividend for 32 consecutive years, demonstrating its commitment to returning value to shareholders.
Over the long term, Realty Income has demonstrated steady growth at a mid-single-digit rate. If this trend continues, it could prove to be an astute long-term investment for those willing to reinvest dividends. The stock currently trades at 14 times its FFO, representing an attractive valuation for one of the most reliable REITs in the market.
2. Explore Rexford Industrial Realty: A Leader in Southern California’s Industrial Sector
With a robust economy and a thriving industrial base, California ranks as the world’s 11th-largest economy if considered as a standalone country. Rexford Industrial Realty (REXR -1.87%) manages an extensive portfolio of over 400 industrial properties, primarily located in Southern California. These properties serve various functions, including manufacturing, warehousing, distribution, and research and development, supporting tenants across a multitude of industries.
Rexford Industrial Realty’s current dividend yield has reached 5.3%, marking its highest record to date. While unusually high yields can sometimes signal caution, this situation appears more like an opportunity. The company’s FFO comfortably covers the dividend, boasting a payout ratio of just 73%. Since going public in 2014, Rexford has consistently increased its dividend every year, even during the challenges presented by the COVID-19 pandemic.
Over the last five years, Rexford Industrial Realty has achieved an impressive annual FFO growth rate of 16%. This solid performance makes it a compelling choice for investors, especially given that the stock trades at just over 14 times its FFO. This combination of growth potential and attractive dividend yield positions Rexford Industrial Realty as a standout in the real estate market. Furthermore, with limited developable land available in Southern California, the company is likely to maintain its pricing power as a key player in the region’s real estate landscape.
3. Capitalize on E-Commerce Growth with Prologis: A Global Leader in Logistics Real Estate
The rise of e-commerce represents one of the most significant growth trends in today’s economy, and Prologis (PLD -1.00%) is well-positioned to capitalize on this trend. The company specializes in developing, leasing, and sometimes operating properties tailored for supply chain and logistics purposes on a global scale. Notable tenants include industry giants such as Amazon, Home Depot, FedEx, and United Parcel Service (UPS). Prologis’s properties are strategically located near crucial transportation hubs, facilitating efficient distribution and logistics operations.
Prologis also boasts a solid initial dividend yield of 4%, combined with robust growth metrics. The company has achieved an impressive annual FFO growth rate of 12% over the past five years. Prologis has a strong track record of raising its dividend for 11 consecutive years, with an average annual increase of 13% during this period. The payout ratio remains reasonable at 72% of projected 2024 FFO, and Prologis has earned an “A” credit rating from S&P Global, signifying a high level of financial stability and trustworthiness—key traits for any investor.
The company is poised for continued growth, especially with new construction for supply chain properties on the decline due to higher interest rates. Consequently, Prologis is expected to experience sustained demand for its properties, especially as e-commerce continues to expand, currently representing only 16% of total retail spending in the United States. Although the stock trades at over 18 times FFO, this valuation is reasonable given the strong growth prospects that Prologis presents in the market.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, FedEx, Home Depot, Prologis, Realty Income, and S&P Global. The Motley Fool recommends United Parcel Service and suggests the following options: long January 2026 $90 calls on Prologis. The Motley Fool maintains a disclosure policy.
