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2 REITs With Robust and Stable Dividends

Dependable revenue should allow Healthpeak and Regency Centers to continue paying dividends at current levels.

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Kevin Brown: Real estate investment trusts are attractive investments for income-oriented investors, so we want to highlight two companies that are paying above-average dividends. While there are many REITs that have high current yields, many of those high-yielding companies are delaying decisions on paying out second-quarter dividends, potentially leaving investors with a much lower yield than they would have anticipated. The two companies we want to highlight have already declared their second-quarter dividends, and we believe their cash flows should remain steady enough to consistently pay their current dividend levels.

Healthpeak is a healthcare REIT currently providing a mid-5% dividend yield. The company's portfolio of life science buildings in some of the largest research campuses across the country and medical office buildings attached to major hospital systems should continue to provide Healthpeak with dependable, growing streams of revenue. While senior housing is going through a downturn due to the coronavirus, this segment should produce significant growth over the next decade as demand from the baby boomers picks up. We think Healthpeak presents a safe short-term investment with fundamentals that will trend upward over the coming years.

Shopping center REIT Regency Centers provides a solid 5% dividend yield at a significant discount to our fair value estimate. The company has traded off on fears of retail weakness stemming from coronavirus shutdowns and a broad economic recession impacting the company's portfolio. However, Regency's strategy to own high-quality shopping centers with grocery stores as anchors is paying off as grocery stores are one of the few retail industries seeing an uptick in sales over the past few months. This is keeping foot traffic high at Regency's portfolio, which supports sales and thus revenue for Regency. We therefore think Regency's dividend is relatively safe despite the chaos in the retail environment.

In summary, there are several REITs that income-oriented investors should keep an eye on for both high dividend payouts and potential capital gains.

Kevin Brown does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.