3 High-Dividend Real Estate Stocks to Buy in February
At times like these, when indices are high and investors are going crazy (e.g., short squeeze mania), buying a high-dividend real estate stock or two can help you focus on other things. They know how to track the returns your portfolio is making, rather than the ups and downs of volatile stock prices. If that sounds like a good thing, here’s an introduction to high-yield WP Carey (NYSE: WPC), Broadmark Realty (NYSE: BRMK), and National Health Investors (NYSE: NHI).
1. Smooth sailing
WP Carey owns a portfolio of net rental assets, which means that its tenants are responsible for most of the operating costs of the properties they use. WP Carey is widely considered to be a relatively low risk segment of the real estate sector and goes one step further. The portfolio is also divided between industrial (24% of rents), warehouse (23%), office (23%), retail (17%) and self-storage properties (5%). But that’s not the end of the story – it also generates around 37% of its rents outside of the US, mostly in Europe.
They know that diversification is good for your portfolio, but also for the portfolio of a real estate investment trust (REIT). Evidence of this comes from the coronavirus pandemic earlier in 2020 when WP Carey’s worst rental collections month (May) was a staggering 96%. It’s basically like nothing happened, with numbers up to 99% in December.
Longer-term, the REIT has increased its dividend every year since it went public in 1998, which lasted over two decades. Add in a generous 6.1% dividend yield and the story is complete and compelling.
2. Help build the future
Next up is Broadmark Realty, a mortgage REIT. Usually, mREITs are a fairly risky area of the REIT space that is characterized by high leverage and uncertainty. But Broadmark is turning this model on its head.
For starters, the company is a so-called hard money lender. This means that construction companies receive short-term loans that are repaid when the building is completed or sold. Broadmark only offers loans worth around 60% of the expected selling price of a property, leaving plenty of leeway before it is hit. And it doesn’t use leverage and has a debt-free balance sheet. Debt-free companies can weather market storms more easily.
But the really interesting thing is that Broadmark wants to grow. At the end of the third quarter in 202, the company had $ 174 million in cash that it was planning to use for new loans. The dividend for the first quarter of 2021, meanwhile, has increased by 17%, suggesting that this is exactly what has been done and more investment is likely on the way.
To be fair, the REIT, roughly a year old, cut its dividend by 25% during the worst of the pandemic. However, this was related to delays in the construction of the coronavirus, rather than a collapse in its business model. By the third quarter, business was largely back to normal. With a dividend yield of around 8%, this unique mortgage REIT is worth a closer look.
3. A service needed
National Health Investors is a healthcare REIT with a portfolio of nursing homes (27% of sales), assisted living (32%) and retirement homes (37%). It is basically at the center of the coronavirus storm as its properties are designed to bring older adults into the group environments where the novel disease tends to spread among the most affected age groups.
It wasn’t easy as some of his lots were occupied by the mid-70% from the mid-80% before the pandemic started. National Health Investors works with its tenants to help them find their way during this time, such as offering rent deferrals to reduce financial success.
However, this means that the National Health Investors are feeling the pain, at least temporarily. The key here, however, is that the demographics of an aging population have not changed – more and more people will need REIT real estate services over time. So occupancy is likely to pick up again once the world moves past the pandemic.
Even if the REIT business could be impaired in the short term, it has held up quite well so far, as the adjusted funds from operations in the third quarter rose only slightly compared to the previous year. It even managed to increase the dividend in 2020. With a 6.6% return and a demographic tailwind business, more aggressive investors may want to take a closer look.
A side effect of dividends
The big thing about dividends investors like is that they provide a stream of cash. But there’s another aspect of dividend stocks that shouldn’t be ignored: When times are tough, investors can watch their dividends and ignore the fluctuations of the broader market. Boring, high-yielding dividend stocks like WP Carey, Broadmark, and National Health Investors could be just what your portfolio – and maybe your emotions – need too.