Dividends are great, especially for investors looking to live off of the income their portfolios generate. But this is only true if you can count on the dividends being paid through both thick and thin. This is why dividend investors will love Universal Health Realty Income Trust (NYSE:UHT) and W.P. Carey (NYSE:WPC).

Out of favor

Universal Health Realty Income Trust has increased its dividend annually for 36 consecutive years, placing it among the Dividend Aristocrats. The real estate investment trust's (REIT) yield is about 5%, which is toward the high end of its recent historical range. In fact, in early 2020 the yield was a touch over 2%, so things have changed materially over the past couple of years.

A sign with the word "dividends" next to a money roll.

Image source: Getty Images.

At first you might think that the yield issue here relates to the coronavirus pandemic and the negative impact it's had real estate and the health-care sector. However, the REIT primarily owns medical office space (roughly 72% of its portfolio), an area that has generally held up well.

Instead, the big problem is that Universal Health is working through some portfolio changes. These include property exchanges with its external manager, Universal Health Services, and a specialty hospital that is being vacated by the current tenant while being marketed to other tenants (or could end up being sold). It's not clear how these matters will work out, and investors appear concerned that the outcomes could be negative. 

However, given the REIT's long history of supporting its dividend, it makes sense to give management the benefit of the doubt. Of note, the dividend was increased twice in 2020 despite the pandemic. In fairness, the increases were small, but that's actually the norm here: slow and steady dividend growth.

Meanwhile, third-quarter funds from operations (FFO) of $0.92 per share handily covered the $0.70 quarterly dividend payment, tallying to an FFO payout ratio of 76%. That leaves ample room for adversity before the dividend is at risk. If you like consistent dividends and can handle a little near-term uncertainty, Universal Health Realty's historically high yield is worth a close look today.

A change in view?

Next up is W.P. Carey, a REIT that has increased its dividend every year since its IPO in 1998. It isn't a Dividend Aristocrat yet, but it's almost there. Meanwhile the 5.4% dividend yield is a good deal higher than some of its closest peers, notably net lease industry bellwether Realty Income, which has a yield of 4.2%. There are reasons for that yield difference, which highlight that W.P. Carey is trading at a discount. But there's also reason to believe the discount could narrow.

W.P. Carey is highly diversified, with assets in the industrial (25% of rents), warehouse (24%), office (21%), retail (17%), and self-storage (5%) markets. It also generates a much of its rent (roughly 37%) from outside the U.S. This is a pretty unique portfolio, but it's one that has clearly been a net benefit for investors, given the dividend consistency here.

WPC Dividend Yield Chart

WPC Dividend Yield data by YCharts

Meanwhile, like Realty Income, W.P. Carey relies on net leases, which means that it owns the assets but its tenants are responsible for most of the operating costs of the properties they occupy. Spread across a large portfolio, this is a low-risk approach.

One interesting development, however, is that Realty Income has been pushing into foreign markets lately, which means it is starting to use W.P. Carey's playbook. So the difference between the yields on these two REITs, which is a full percentage point, starts to take on material meaning.

Whether the two should be seen as competitors is a judgment call. Realty Income's portfolio is largely focused on retail, so there are differences between the two. However, as investors get more comfortable with Realty Income's global foray, they will likely start to see W.P. Carey in a different light. That could mean the yield gap between the two shrinks, with W.P. Carey's yield falling as investors give it a higher valuation. For long-term investors, given W.P. Carey's relatively high yield and impressive dividend record, that's a prospect worth digging into.

High and reliable yields

The key for income investors is to find a balance between a high yield and a safe dividend. On this score, both Universal Health Realty and W.P. Carey look relatively attractive today. And they both prove that, even in a world where low yields are the norm, you can still find dividend stocks worth buying.

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.