It's getting tougher to find compelling dividend stocks these days. Following the market's surge over the past year, the average dividend yield of stocks in the S&P 500 is around 1.4%.
However, one sector stands out for paying well above-average dividend yields: real estate investment trusts (REITs). Several REITs currently boast dividend yields above 4%. Three top options in that sector for dividend investors to consider are Realty Income (O 0.42%), SL Green Realty (SLG 0.41%), and Medical Properties Trust (MPW 5.56%). Here's why this trio stands out.
A dividend lover's dream stock
Realty Income currently offers investors a 4.1%-yielding dividend. However, that yield is only part of the appeal. The REIT is one of the most dependable dividend stocks around. It has paid 611 consecutive monthly dividends. It has also given its investors 110 raises since its initial public offering in 1994, including increasing its payout in each of the last 94 straight quarters. Overall, it has grown the dividend by a 4.4% compound annual rate.
The REIT should have no problem continuing to grow its payout in the future. For starters, it recently agreed to acquire fellow REIT VEREIT (VER) in an all-stock deal that will boost its adjusted FFO per share by more than 10%. That deal will further diversify its retail and industrial-focused portfolio while giving it more room in the near term to increase its payout. Meanwhile, the company has one of the strongest balance sheets in the REIT industry. That gives it the financial flexibility to continue acquiring more properties to support future dividend growth.
Steadily growing toward the sky
SL Green Realty's dividend, which it also pays monthly, currently yields 4.7%. The office-focused REIT also has a solid track record of growing its dividend as it notched its 10th consecutive annual increase last year.
SL Green should be able to continue growing its payout in the future. In recent years, its focus has been on shrinking its portfolio to concentrate on its best assets by selling select properties. That gave it the cash to invest in development projects and repurchase shares. The buyback enabled the company to grow its FFO per share last year even though it declined on an absolute basis due to some pandemic-related headwinds and the impact of asset sales. Meanwhile, the REIT currently has several large-scale development projects under way that should help grow FFO in the future, especially when combined with its needle-moving share repurchase program. Because of that, SL Green should be able to continue growing its attractive monthly dividend in the years to come.
A healthy income stream
Medical Properties Trust pays a 5.3%-yielding dividend. The hospital-focused REIT has also done an excellent job growing its dividend over the years. Overall, it has increased its payout in each of the last eight consecutive years, growing it at a 5% compound annual rate.
That upward trend should continue, given its success in growing its normalized FFO by making a steady stream of acquisitions. Medical Properties closed nearly $3.6 billion of new hospital investments last year, helping boost its normalized FFO per share by 21%. Meanwhile, it has already secured $1.6 billion of new investments this year, which helped drive a 13% year over year increase in normalized FFO during the first quarter. With a solid balance sheet and reasonably conservative dividend payout ratio, the REIT has the financial flexibility to continue making acquisitions, which should support future dividend growth.
Top-notch income streams
Sometimes high-yield stocks can be higher-risk. However, that's not the case for this trio of REITs. That's because all three have a long history of growing their payouts thanks to their solid strategies and financial profiles. Because of that, they're excellent options for investors seeking above-average income streams.