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REITs have gained popularity over the past year, as other income investments haven’t been producing due to the historically low interest rates.
While this has caused REIT prices to climb and their yields to fall, there are still opportunities to pick up some high dividend REITs with room for price growth.
MGM Growth Properties MGP
MGM Growth Properties is a hospitality REIT that owns casino properties throughout the United States. The company's triple-net master lease structure left it virtually unfazed throughout 2020, even with markets like Las Vegas being shut down.
The company has grown its portfolio consistently, with over $1 billion in acquisitions each year since its IPO in 2016. Dividends have also been increased in 12 of the 20 dividends paid to date, with the current yield at 5.38%.
With the upcoming acquisition of MGM Springfield expected to have an immediate impact on the REIT’s FFO, another dividend increase in 2021 wouldn’t be surprising.
Medical Properties Trust MPW
Medical Properties Trust is a health care REIT that invests in net-leased hospital properties. The company already increased its dividend in the first quarter of 2021, but I’m expecting to see a further increase by the end of the year.
The company’s revenue grew almost 32% from the first quarter of 2020 to the first quarter of 2021 as a result of the $3.4 billion in acquisitions during 2020.
The REIT has already completed over $1 billion in acquisitions this year and announced on June 15 its acquisition of 18 inpatient behavioral health hospitals for $950 million.
Adding these new properties to the portfolio should result in a boost to the company’s FFO. Since the 5.27% dividend yield is already well covered at an FFO payout ratio of 64%, the company is likely to either increase dividends or use the extra cash to grow even further. Either scenario is great for investors.
Iron Mountain IRM
Iron Mountain offers an attractive dividend yield with a lot of upside potential over the next few years. This specialty REIT has been in the secure storage business for decades, and while that core business remains strong, it's quickly gaining market share in the data center space. Since the company’s customer base already includes 95% of the Fortune 1000 companies, it's in a great position to continue capturing more of that market.
Iron Mountain’s stock price is already up over 56% in the past six months, which has caused many shareholders to sell as the stock passed its price target. However, I believe there’s still a lot of upside left for this REIT in the long term and a 5.4% dividend yield is enough to keep my eyes off the stock price in the meantime.
Focus On The Income
Investing in REITs with a growing dividend can result in significant yields in the long run regardless of what happens with the price. As long as the company’s fundamentals remain intact, you can watch your passive income stream continue to grow over time.
Want to learn more about investing in REITs? See How to Invest in REITs.
The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.
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