3 REITs to Buy Hand Over Fist in April

Real estate is one of society’s oldest wealth accumulation tools. There is so much wealth in the world that people will always need it. However, most investors do not have enough funds to invest in real estate on a large scale.

This is where real estate investment trusts, or REITs, can help. This gives investors the flexibility to buy and sell stocks and the passive income that comes with owning real estate.

Here are three fantastic REITs investors should buy directly in April.

Why REITs Make Great Dividend Stocks

REITs buy and lease real estate. They pay no corporate taxes as long as they pay out at least 90% of their profits as dividends to shareholders, which is why they make such good income stocks. Many REITs have dividend yields that are much higher than what you typically find with other companies.

As you can see below, there are different types of real estate. REITs typically stick to what they’re good at, so they typically focus on a specific type of property. Some examples include retail properties, hospitals and healthcare facilities, apartment buildings, and warehouses.

You can build a diverse REIT portfolio and own a variety of property types. Here are three great examples:

1. Leader in logistics real estate

prologue (PLD -1.77%) This is a REIT that focuses on state-of-the-art distribution centers. We lease 1.2 billion square feet of real estate across four continents.

Many of the tenants are companies from a variety of industries, from retailers to automotive companies. It is also one of the largest REITs, with a market capitalization of approximately $120 billion.

Based on the current stock price, the company’s dividend yield is less than 3%. REITs pay dividends from cash flow, called funds from operations (FFO), which is equivalent to the earnings of traditional businesses.

Dividends are very well funded. The current dividend payout ratio is just 56% of FFO, and management’s recent payout growth of 10.3% should instill confidence in shareholders. Prologis has paid and increased dividends for 10 consecutive years.

Analysts expect revenue to decline slightly this year, but expect accelerating double-digit growth rates in subsequent years. The stock trades at 21 times projected 2024 FFO, which is a fair price if Prologis’s FFO grows 11% to 13% annually, as analysts expect.

2. Blue chip retail REIT

NNN REIT (NNN -1.08%) We specialize in single tenant retail properties. Think fast food restaurants, car washes, and gas stations.

The company owns more than 3,500 properties across the United States, which typically have 10-year leases, providing steady revenue for NNN. This is great in any economy because renters are recession-proof. People still need gasoline and a quick meal on the go through good times and bad.

The company has a long track record of dividend growth to back it up. Management has paid and increased dividends for 35 consecutive years. It also boasts an attractive 5% yield at today’s stock price. Dividends are cushioned by a manageable payout ratio of 64% based on FFO.

You own NNN REIT for stable, high-yield dividends, not growth. Analysts believe FFO will grow at a low single-digit rate over the long term, which warrants a low valuation of 13x current FFO. If you want to earn low-stress passive income, consider this REIT.

3. Self-storage superstar

public repository (PSA -1.23%) It owns 3,300 self-storage centers across the U.S. and, unlike many REITs, operates and manages its properties.

The cool thing about Public Storage is that you can easily adjust customer pricing. It has over 22 million customers and the average renter stays for 7-10 months. That’s a good thing, as long as sales aren’t too high.

This company is not a traditional dividend growth stock. Management has paid special dividends before and doesn’t raise its quarterly dividend every year, but that doesn’t necessarily mean there’s anything wrong with the dividend. The dividend payout ratio is healthy at 67% of FFO, and investors receive a yield of more than 4% on the current stock price.

Analysts predict FFO growth will be in the low to mid-single digits over the next few years. This is another REIT that won’t give you a huge bump in growth, but will provide steady income and peace of mind for your portfolio. Today the stock trades at a reasonable 17 times FFO.