Real estate investing has long been a great way to build wealth, even in inflationary times. In fact, it has long been one of the primary portfolio antidotes to rising prices in an overheated economy.
Real estate investment trusts (REITs) provide easy, liquid passage into and out of the real estate investing world, offering the potential for capital appreciation while meeting the requirement to use most net income to pay shareholder dividends in exchange for corporate tax advantages.
Here are a couple of REITs to consider, selected because their yields are in the same ballpark as the current 7% rate of inflation and because there are solid arguments for those payouts to continue apace.
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Blackstone Mortgage Trust
Blackstone Mortgage Trust (BXMT -4.60%) is a mortgage REIT (mREIT) yielding about 7.9% based on a stock price of roughly $31 a share. BXMT, with a market cap of $5 billion, has a portfolio of around $22 billion in senior loans collateralized by commercial real estate in North America, Europe, and Australia.
BXMT is sponsored by Blackstone (BX -0.43%), one of the world's biggest asset managers. The REIT's website says this of being part of that $230 billion business: "Our manager's global presence and dynamic capabilities enable us to identify opportunities with conviction and partner with leading sponsors and financial institutions."
BXMT's executive team is made up of veterans of various roles in the Blackstone empire, adding stability and experience that lends confidence to the REIT's ability to protect yield and value across changing rate and credit environments.
BXMT has a dividend payout ratio of 96.88% but said that its portfolio growth generated enough earnings to provide 102% dividend coverage in third-quarter 2021.
CTO Realty Growth
CTO Realty Growth (CTO -0.23%) is a newly minted retail REIT -- after several years as a legacy landholder and developer -- that is yielding about 6.4% based on a stock price of about $60 a share.
Relatively small with a market cap of about $378 million, this Daytona Beach, Florida-based operation has a portfolio of 19 properties in 11 states and Washington, D.C., and, impressively enough, reported 100% rent collection year to date as of the third quarter. It also owns about 16% of another REIT, Alpine Income Property Trust (PINE -2.59%), from which it derives fee income.
The portfolio is focused on retail-based, multitenant properties with mixed-use lifestyle and office components in higher-growth cities. Interestingly, CTO has a significant amount of developable land and mineral rights, too, which it can sell if it needs to sustain its dividend payout of $1 a share during the past four quarters. In fact, it sold 39,000 acres of subsurface interests for $3.5 million in 2021.
CTO also claims to be the best-performing REIT in its peer group since the beginning of 2020, with a total return of 25.7%. A very modest 18.9% dividend payout ratio combined with rents from a portfolio that added eight brand-name-anchored properties in 2021 points to the ability to maintain or raise its dividend payouts.
