Dividend income can really add up. Since 1930, dividend payments have contributed 40% of the total returns for the S&P 500 Index, according to data from Morningstar and Hartford Funds. Furthermore, companies that paid a consistently growing dividend have historically outperformed their stingier peers.
Companies that prioritize dividends can be great wealth creators. Three stocks that have historically been excellent dividend payers are EPR Properties (EPR -0.32%), Realty Income (O -0.17%), and SL Green Realty (SLG -0.53%). These real estate investment trusts (REITs) pay monthly dividends with above-average yields that should continue growing in the coming years.
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Back on track
EPR Properties is a specialty REIT focused on experiential real estate like movie theaters and other attractions. While its portfolio faced some headwinds during the pandemic, forcing the REIT to suspend its dividend temporarily, it has emerged stronger than ever.
The REIT reinstated its monthly dividend last year and recently increased it by 10%, pushing the current yield above 6%. That's well above the REIT sector's 3% average and the S&P 500's 1.3% yield. EPR Properties should be able to continue growing its payout in the future.
Several factors support that view. First, EPR Properties has a conservative dividend payout ratio of 75% of its estimated funds from operations for 2022. That's providing it with excess cash to fund new investments. Combined with its strong liquidity position consisting of $288.8 million in cash and an undrawn $1 billion credit facility, and recently awarded investment-grade rated balance sheet, the REIT has ample financial flexibility to acquire more experiential real estate. Those future additions should grow the REIT's income stream, enabling it to increase its high-yield dividend, which should enrich investors in the coming years.
A real wealth creator
Realty Income has made its investors a fortune over the years. The retail REIT has increased its monthly dividend 115 times since its initial public offering in 1994, including the last 98 straight quarters. Overall, it has grown its payment by a 4.4% compound annualized rate, which has helped it produce market-beating total returns of 15.5% annualized. It currently clocks in at an attractive 4% yield.
The REIT has plenty of financial flexibility to continue growing its portfolio, rental income, and dividend. The REIT has a solid dividend payout ratio of 78.5%, enabling it to retain some cash to help fund new investments. Meanwhile, it has one of the strongest balance sheets in the REIT sector with A-rated credit.
Realty Income has the financial capacity to acquire at least $5 billion of real estate this year. Meanwhile, it has plenty of runway to continue expanding in the future. There are trillions of dollars of owner-occupied commercial real estate in its core U.S. and European markets, providing a vast pipeline of future acquisition opportunities.
Rising toward the sky
SL Green Realty is an office REIT focused on the New York City market, where it's the largest office landlord. The REIT has increased its monthly dividend for 11 straight years and currently yields 5%.
While there's a lot of concern about the future of the office market, SL Green's high-quality properties have remained in high demand. The office REIT's latest quarterly results show that the Manhattan office market is getting back on its feet. That leads SL Green to believe that leasing volume and rental rates will rise this year.
Meanwhile, the REIT continues to high-grade its portfolio, selling select office buildings and using the cash to fund development and redevelopment projects and repurchase its stock. When combined with an improving office market, this capital allocation strategy should enable SL Green to continue growing its dividend and creating value for shareholders.
Steadily rising passive income streams
EPR Properties, Realty Income, and SL Green Realty pay monthly dividends that yield well above average. Meanwhile, all three REITs should be able to continue growing their payouts in the coming years. They should supply their investors with lucrative and steadily rising income streams, which could make them a fortune over the long-term.
