3 Real Estate Stocks to Buy With Dividends Over 5%

Real estate investment trusts (REITs) can make excellent dividend stocks. Thanks to their favorable tax structure, they tend to offer some of the highest dividend yields in the market, and they also have the potential for growth, as their underlying properties appreciate in value over time.

Here are three particularly attractive REITs that could be excellent additions to your portfolio, all of which pay dividend yields well over 5%, based on their current stock prices.

Data source: TD Ameritrade. Stock prices and dividend yields as of Aug. 9, 2017.

A hotel REIT that looks like a bargain

Apple Hospitality REIT is one of the largest hotel-focused REITs in the market, with 235 hotels in its portfolio, operated under various Marriott and Hilton brand names.

Image source: Getty Images.

Instead of investing in high-end hotels, Apple Hospitality invests in what are known as select-service hotel properties. Essentially, these are brands that serve the middle of the market, without the high-end amenities of luxury hotels, but with significantly more features than bargain-oriented hotels. Homewood Suites and Courtyard by Marriott are two well-known examples of select-service brands, which both make up a significant portion of the company's portfolio.

Apple Hospitality's competitive advantage, aside from its size, is its willingness to reinvest in its own properties in order to maintain a portfolio of properties that are superior to those owned by the competition. Additionally, all of the properties are managed by third-party companies with management fees that are directly related to the performance of the properties, which provides an added incentive to maximize returns.

To be clear, hotels are not a recession-resistant form of real estate. Their day-to-day rental structure is a great thing during prosperous times, but also allows vacancies to spike and revenues to plummet during bad times. However, select-service hotels are well-positioned to take advantage of luxury hotel customers who need to cut back when times get tough, which helps to mitigate this risk.

Senior housing could be an amazing growth opportunity

The baby boomer generation is aging rapidly. In fact, the senior citizen population in the United States is expected to roughly double by 2050. This could create a steady opportunity for companies in the senior housing industry, like Senior Housing Properties Trust.

The company currently owns 434 properties in 42 states and D.C., but despite the name, only about half (by net operating income) are senior housing. Most of the rest (41%) are medical office buildings, and Senior Housing Properties Trust also has smaller allocations of skilled nursing facilities and wellness centers.

Image source: Senior Housing Properties Trust investor presentation. MOBs = medical office buidings. SNFs = skilled nursing facilities.

So, the aging population could help the senior housing portion of the portfolio for obvious reasons, and also create a steady stream of growth opportunities. As far as the medical offices go, consider that the average senior citizen spends more than double the average American's healthcare spending every year. Seniors use medical offices more frequently, and spend more when they do (including insurance), so this could be a long-tailed positive catalyst for senior housing as well.

Finally, you may be thinking to yourself that an 8.2% dividend yield sounds too good to be true, and in many cases, you'd be right. In fact, I encourage you to question the viability of any high dividend like this. However, in Senior Housing Properties Trusts' case, there's little cause for concern. The current dividend represents a payout ratio of 83%, which is not at all excessive for a REIT.

Temporary oversupply issues have created self-storage bargains

Self-storage companies have been under pressure, mainly due to oversupply fears. While this is indeed a concern, it is a temporary one, and the major, well-established players should be just fine. Now could be a good time to add a company like Life Storage to your portfolio, while it's trading just over its 52-week low.

Life Storage (formerly known as Uncle Bob's Self Storage) isn't the largest player in the business -- in fact, with 675 locations, it's No. 5. However, what the company lacks in scale, it makes up for with growth. In fact, Life Storage added 100 facilities in 2016 alone, and has added 25 more thus far in 2017.

The self-storage market is highly fragmented right now, with the 10 largest companies only controlling about 15% of the market. In fact, the vast majority of self-storage companies operate three or fewer properties. In other words, there's no shortage of acquisition opportunities -- and if oversupply problems strain some of the smaller companies, it could make for some attractive deals. Life Storage also has a third-party management business, which could also be a major growth opportunity in the coming years.