Bear markets are painful for both investors' stomach and their portfolios. If you're a new investor, consider using stocks to generate income. Unlike share price gains, the market cannot take away your dividends once you receive them.
Real estate investment trusts (REITs) are a great way to get paid while you sleep. They are unique businesses, structured to generate income by leasing properties to tenants and then sharing the profits with shareholders as dividends. Here are five fantastic REITs that should be on any new investors' shopping list.
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1. Realty Income: Get paid every month
Realty Income (O -0.27%) specializes in leasing retail properties to tenants, like retail stores, movie theaters, gyms, and convenience stores. The company has increased its dividend for the past 28 years through good and bad times.
Its dividend is paid monthly, which is uncommon compared to most companies that pay quarterly. Investors can grab a dividend yield of 4.5% at today's share price. The company brings in roughly $2.9 billion in rent each year from its more than 11,000 properties. Its balance sheet is top notch, with an A- rating from Standard & Poor's, making Realty Income a stock new investors can feel safe owning.
2. Federal Realty Investment Trust: Dividend royalty
Federal Realty Investment Trust (FRT -1.29%) leases mixed-use and open-air shopping centers in the neighborhoods surrounding major cities in the United States. These markets feature shoppers with higher incomes, and Federal Realty has a grocery component in 75% of its properties, which drives traffic through all economic situations.
This strategy has paid off for Federal Realty; it's a Dividend King, meaning a company that has increased its dividend for 50 years in a row -- 54 years in this case. Affording a continually growing cash expense like a dividend for so long says a lot about Federal Realty's business quality. The stock's dividend yield is 3.6% at the current share price.
3. Public Storage: Storing your money in this market leader
Public Storage (PSA -0.96%) owns and operates roughly 2,500 self-storage facilities across the United States. Self-storage is a vast industry worth approximately $48 billion globally. Public Storage generated $3.4 billion in revenue over the past 12 months, which shows how much room there is for future growth.
The company pays a solid dividend that yields 2.2%, though management hasn't increased the payout in a few years. However, the company's funds from operations, the cash that a REIT produces, has continued growing. Investors should count on the company to keep paying its dividend; the dividend payout ratio is an affordable 70% of cash flow.
4. Simon Property Group: Shopping malls are still in style
Simon Property Group (SPG -1.63%) leases premium shopping malls across the United States, Europe, and Asia. While e-commerce has steadily drawn shoppers to digital channels, premium malls like what Simon Property Group owns continue to show strong foot traffic, thanks partly to investments to evolve its malls into "destinations," complete with entertainment venues and high-end restaurants. This is all designed to build a shopping experience consumers cannot replicate online.
The pandemic lockdowns virtually shut down Simon Property Group's business, and the company cut its dividend to conserve cash. The business rebounded in 2021, growing funds from operations 42% over 2020 to $1.16 billion. The dividend is slowly making a comeback as well, so the company's long-term outlook seems to be stable as it recovers over the coming quarters. The dividend yields 5.1%, despite not being up to pre-pandemic levels.
5. American Tower: Dialing up dividends
American Tower (AMT -1.41%) is the "pick and shovel" of communications; it owns and leases the land and tower structures that telecom companies use for broadcasting their networks. It owns more than 220,000 sites worldwide on six continents and in 25 countries. The company has been around since the mid-1990s but officially became a REIT in 2012.
Since then, management has raised the company's dividend each year, and investors can get a 2.3% dividend yield at today's stock price. Investors should sleep well holding American Tower because cell tower sites are critical infrastructure for telecom companies. American Tower takes the cost and burden of land ownership off its tenants, so it's improbable that they will default on payments or uproot their cellular networks to go elsewhere, making American Tower a straightforward REIT for new investors.
