Kevin Brown: Real estate investment trusts are excellent investments for income-oriented investors, so we want to highlight three companies that are paying above-average dividends.
Mall-REIT Macerich combines not only a dividend yield near 7%, but is also trading at a significant discount to our fair value estimate. While 2019 might be a rough year for the company as it deals with store closures and redevelopment expenses, we think Macerich will be a much stronger company once they release these empty spaces to higher-quality tenants. Long-term investors should be rewarded with years of solid growth emanating from turning around these stores, and in the meantime can collect the company's high dividend. However, there are significant risks to Macerich's plan, so risk-averse investors should be cautious.
Park Hotels & Resorts is another REIT that income-oriented investors should consider given the company's current mid-5 yield. Given that Park's portfolio is in many markets with below-average supply growth, and that management is only midway through a years-long process of improving hotel operations, we think that Park should see industry-leading NOI growth over the next few years. However, given hotels' sensitivity to the overall economy, Park is another higher-risk company that could underperform if leading economic indicators turn negative.
Investors looking for a defensive name that has a 5% yield should consider healthcare REIT Ventas. While senior housing is going through a downturn due to high supply, the pace of construction starts suggests that supply should fall off just as demand from baby boomers picks up. Even during the great financial crisis, Ventas maintained and then raised its dividend, so we think they present a safe investment with upward-trending fundamentals.
In summary, there are several REITs that income-oriented investors should keep an eye on for both high dividend payouts and potential capital gains.