Real estate investment trusts (REITs) allow investors to own a stake in unique properties. These niche real estate companies can sometimes dominate their categories, allowing them to print money for their business and dividends for their shareholders.
So if you're looking for ways to generate passive income, where the dividends land in your bank account while you're asleep at night, here are three REITs that are practically money-printing machines.
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1. W.P. Carey: A reliable retail REIT
W.P. Carey (WPC -0.85%) is a retail REIT that's one of the largest in its industry. The company owns and leases more than 1,300 single-tenant retail properties across various sectors. It's a net lease REIT, which means that its tenants are responsible for most of the costs associated with occupying a property, like maintenance, taxes, and insurance.
The company has a stellar dividend track record; it's increased its payout for the past 24 years, meaning it's one year away from becoming the equivalent of a Dividend Aristocrat. Investors can get a dividend yield of 5.5% based on today's share price. The dividend payout ratio is a little high, at 86% of cash flow, but it should be very manageable, with just 4% of W.P. Carey's debt coming due in the next 24 months. Roughly 99% of the company's leases have built-in rent escalators, with more than half of them linked to inflation to help offset rising costs.
The retail market is very fragmented, which gives a significant player like W.P. Carey a leg up on the competition because of its large balance sheet. The company recently announced a deal to acquire Corporate Property Associates 18 for $2.7 billion in cash and stock. Corporate Property Associates 18 is a private REIT that W.P. Carey was managing, and bringing it formally into the company's portfolio should increase its funds from operations (FFO). W.P. Carey has not traditionally been shy about acquisitions when there are opportunities, so investors could see more buying action in the future.
2. Americold Realty Trust: Keeping dividends on ice
Americold Realty Trust (COLD -0.84%) is a REIT that owns and operates 246 temperature-controlled warehouses worldwide. These are mission critical for the food producers and distributors that use them to store their products. Americold estimates that it owns 22% of temperature-controlled storage capacity in the U.S. Americold's business has proven to be stable; its top 25 customers have done business with the company for an average of 35 years.
However, the stock itself is relatively new to the markets, since Americold only went public in 2018, so there isn't a long public history for investors to lean on. The dividend seems safe though; the dividend payout ratio is manageable at 76% of funds from operations (FFO), a key metric of REIT performance. Investors can get a 3.2% yield at the current share price.
Americold saw its FFO drop in 2021 to $1.15 per share, down from $1.29 in 2020. COVID led to significant labor shortages in the global food supply chain, and this hurt Americold because it needs workers to operate its warehouse properties.
Management did note in its 2021 fourth-quarter earnings call that price increases are beginning to have an impact and that the company exited the first quarter of 2022 on a run rate that would cover the increased costs. These headwinds have the stock down near 52-week lows, which could be an opportunity for long-term investors to buy in before the business stabilizes again.
3. Postal Realty Trust: Powering the U.S. Postal Service
Postal Realty Trust (PSTL -0.36%) is the only publicly traded REIT that solely services the U.S. Postal Service (USPS). It owns and leases nearly 1,000 properties to the USPS in all 50 states. The USPS is a core infrastructure, with a monopoly on mail delivery, and the most commonly used provider for e-commerce package shipments. It's a great tenant to have, and Postal Realty's occupancy has averaged 98.5% over the past decade as a result.
While Postal Realty didn't go public until 2019, it's raised its dividend for each of the past nine quarters. It's hard to know how long that will continue, but its dividend payout ratio is 76%, so it's currently very affordable. Postal Realty's annualized rental income has increased 310% since its IPO in May 2019. Today, investors buying the stock can look forward to a 5.2% dividend yield.
There's a lot of room for the REIT to continue expanding over the coming years. The USPS occupies more than 31,000 properties, and more than 25,000 of them are privately owned and leased to the USPS. As these private owners sell, Postal Realty could have the opportunity to steadily grow through acquisitions.
