Earning passive income through dividends is one of the most appealing aspects of investing in real estate investment trusts (REITs). However, investors who rely on this kind of income (e.g., retirees) must guard against downturns by diversifying their portfolios. Keep reading to learn how to earn $300 or $3,000/month in passive income by splitting your investment into these REITs with solid performance histories.
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Why is Diversification Important for Investors Seeking Passive Income?
Almost everyone has heard the adage warning against "putting all your eggs in one basket." Diversification is critical for all investors but even more crucial for investors looking to generate passive income — the reason is obvious. If you're only relying on one REIT or one sector for your income, you're only one market correction or bad quarter away from being unable to pay your bills.
Although REITs have historically been able to perform independently of the stock market, there is always a risk of a sector-wide downturn. For example, you might be experiencing a difficult time right now if you are relying solely on the commercial real estate sector for your dividends. The good news is that you have many solid REITs in multiple sectors that can yield solid dividends while minimizing risk.
Postal Realty Trust
Postal Realty Trust (NYSE: PSTL) is an equity REIT that owns and rents facilities nationwide to the United States Postal Service. Technically, this is an office REIT, but most of Postal Realty Trust's properties are signed to very long-term leases with rent increases phased in. Unlike the commercial office market in America's major downtown areas, Postal Realty Trust's assets have single-tenant setups and the demand for space has not been reduced by remote work.
Postal Realty Trust shares are trading at a reasonable $14.10, and Benzinga estimates their market cap at just under $320 million. More importantly for REIT investors, Benzinga also estimates Postal Realty Trust is paying an impressive 6.81% dividend. That's why it's a REIT worth considering if you're focused on passive income instead of short-term share value growth.
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Realty Income
Realty Income (NYSE: O) is a REIT that owns and operates storage facilities in the U.S. and Europe. It is universally recognized as one of the industry leaders in the personal storage business, and its asset portfolio shows why. Realty Income operates over 15,000 properties in 49 states, all occupied by single tenants on long-term, triple-net leases.
This combination of long-term triple-net leases makes Realty Income one of the most reliable performers in delivering investor income. Realty Income's $55.75 share price and estimated $48 billion market cap are both impressive, but delivering dividends is where this REIT shines. In addition to paying a respectable 5.74% dividend, Realty Income has made 649 consecutive monthly distributions to its shareholders.
How to Make $300 or $3,000 in Monthly Income on These REITs
Here's how to make $300 or $3,000 in monthly income with a diversified investment into Postal Realty Trust and Realty Income. $300 in monthly income is $3,600 annually, which means each investment would need to earn $1,800 in annual dividends.
Start with Postal Realty Trust, trading at $14.10/share with a 6.81% dividend. That translates to an annual dividend of $0.96/share. You would need to purchase 1,875 shares of Postal Realty Trust for $26,437.50 to earn an average yearly dividend of $1,800 on this REIT. You need to multiply your original investment by 10, which is $264,375 (or 18,750 shares), to boost your average yearly dividend to $18,000.
Realty Income shares are trading at $55.75 with a 5.74% annual dividend. That translates to an annual dividend of $3.20/share. You would need to purchase 563 shares of Realty Income for $31,387.25 to earn an average yearly dividend of just over $1,801 on this REIT. You need to multiply your original investment by 10, which is $313,872.50 (or 5,631 shares), to boost your average yearly dividend to $18,000.
Diversification Lowers Risk, but it Doesn't Eliminate It
It's important to remember that the possibility of loss is a fact of life in investing, and you can never "diversify" risk out of your investment portfolio. With that said, Postal Realty Trust and Realty Income have strong track records and good long-term prospects. Spreading your investment dollars across these REITs could put you in a position to earn some solid annual dividends, even if other real estate sectors take a downturn.
Disclosure: Estimated dividends and share prices fluctuate daily. There may be some variance between the current estimates and the estimates at the time this article was written.
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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