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Real estate investment trusts, or REITs, can give investors exposure to real estate without the challenges and risks of buying property. Here are five property-owning REITs that can give you excellent dividends and lots of growth potential, listed in no particular order:


Share Price

Dividend Yield

Realty Income






Public Storage



AvalonBay Communities



STAG Industrial



Bulletproof retail properties

Realty Income (NYSE:O) is a massive REIT specializing in freestanding retail properties. And, although retail is perceived as risky by many investors, Realty Income's business is anything but.

First, most of the tenants are engaged in recession-resistant or competition-resistant businesses. For example, non-discretionary businesses like drugstores and gas stations sell products people need, not products they want. Heavily discounted businesses such as warehouse clubs and dollar stores offer deals that can't be beat, even by online competitors. And service-based businesses such as fitness clubs and auto repair businesses are by definition immune to competition from online retailers. (That is, until Amazon figures out how to deliver portable fitness centers.)

Furthermore, Realty Income's tenants sign long-term (15 years or more) net leases, which means that the tenants pay property taxes, insurance, and maintenance on the buildings. Realty Income simply collects a rent check, which the leases ensure will grow each year.

Strong demographics and an upcoming spinoff

Healthcare real estate trust HCP (NYSE:PEAK) has a lot going for it these days. For starters, the demographics point strongly toward a bright future for healthcare properties. The population of senior citizens in the U.S. is expected to roughtly double by 2050, and healthcare expenses have been increasing faster than overall inflation.

Source: HCP company presentation.

The most recent exciting development for HCP shareholders is the proposed spinoff of the company's troubled skilled-nursing and post-acute-care properties into a newly created REIT.

This could be great news for two reasons. First, it will immediately increase the portfolio quality of HCP's remaining core properties, which translates to easier and cheaper borrowing, as well as more predictable income. Second, it allows the management of the newly created REIT to focus all of their efforts on maximizing value, and will open up strategies that aren't available or practical while those properties are still a part of HCP.

While there are sure to be some growing pains as the spinoff plays out, I'm confident that this is an extremely positive move for long-term investors. Besides, as I've written before, healthcare real estate stocks are trading cheaply right now, which I believe more than makes up for any short-term turbulence.

Those big, orange storage facilities

If you live in the United States, there's a good chance that you're familiar with Public Storage's (NYSE:PSA) recognizable orange storage facilities. The company has such a strong presence in the self-storage business that it's actually larger than its three closest competitors combined.

It's tough to argue with the business model of the self-storage industry. Operating expenses are lower than for most other types of real estate, and it doesn't cost much to turn over a tenant. Even more remarkable, Public Storage needs only 30% occupancy for its properties to break even, and the company currently operates at nearly 94% capacity -- talk about a margin of safety!

Plus, self-storage is a pretty recession-resistant business. If people have too much "stuff" to keep in their homes, they still need a place to put it no matter what the economy is doing. Simply put, storage is a non-discretionary expense for many people. If you're interested, here's an in-depth analysis of Public Storage I wrote last year.

A nation of renters

AvalonBay (NYSE:AVB) develops, redevelops, and manages apartment communities, and as of this writing owns more than 83,000 apartment homes located mainly in attractive markets on both coasts.

There are some pretty compelling reasons to invest in apartments, and AvalonBay in particular. For one thing, the homeownership rate is hovering just above a generational low, indicating a shift toward renting. In fact, 363,000 new renter households were formed in the first quarter alone. Job growth and wage growth in AvalonBay's core markets are strong and indicate there will be more demand for rental housing going forward.

AvalonBay currently has $2.7 billion worth of properties under construction, and properties developed from the ground up have been a strong creator of value. In fact, AvalonBay has consistently produced profit margins greater than 30% on developed properties, and there are no plans to slow down any time soon.

Monthly dividends and predictable income

Similarly to storage facilities, industrial properties have relatively low operating expenses and higher tenant retention. And this is a highly fragmented type of real estate, with a $250 billion market and the largest REIT having less than a 3% market share.

STAG Industrial (NYSE:STAG) is an excellent choice in this sector, with an impressive and diverse portfolio of single-tenant industrial properties. As of this writing, STAG has 223 buildings with about 44 million rentable square feet.

STAG pays an excellent 5.7% dividend yield in monthly installments, and trades at a rather cheap valuation of just 14.2 times this year's expected funds from operations (FFO), a metric that reflects cash flow from a REIT's operations. Although the company hasn't been around too long, its business model has been successful thus far with almost an 100% return since its 2011 IPO (approximately 23% annualized).

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.