Real estate investing is a nice way to hedge against the effects of inflation and a great way to build wealth over the long term while adding diversification to your portfolio.
Real estate investment trusts (REITs), meanwhile, can deepen that diversification by offering the opportunity to focus those dollars on specific industries and segments while at the same time reaping the benefits of the requirement that REITs pay at least 90% of their taxable income out to shareholders.
And then you can go a bit further and buy shares in some very specialized REITs that offer the benefits of that flow of passive income that all successful REITs provide and may also grow both dividends and share price in the years ahead if their narrow targeting keeps hitting the mark.
Here are three examples.
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1. Getty Realty
Many REITs own gas stations, but none focuses on them quite like Getty Realty (GTY -1.13%). Among its 1,028 freestanding properties in 38 states and Washington, D.C. are 710 gas and convenience stores, dozens of car washes and auto service businesses, and a smattering of auto parts stores.
This collection of 3,000- to 5,000-square-foot net-leased locations is 99.5% leased, and the company continues to build its portfolio through acquisition and development, adding more than 100 properties in 2021 alone.
Getty has raised its dividend for nine years running and is currently yielding a nice 5.78%. The essential nature of its clients' businesses should keep this income engine running nicely going forward.
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2. Lamar Advertising
Lamar Advertising (LAMR 0.36%) is a very familiar name that's been around a long time. Just look at the bottom of thousands of billboards around the country.
Charles Lamar founded the company in 1902 as a maker of posters in Baton Rouge, Louisiana, and it has since grown to one of the biggest advertising companies in the world, with more than 351,000 displays across the United States and Canada.
The company says it also operates the largest network of digital billboards, with about 3,900 displays now in place as it grows its portfolio of billboard, interstate sign logo, transit, and airport formats in ways that promise to keep adapting to the changing nature of marketing to consumers while they're out and about.
Since becoming a REIT in 2014, Lamar has provided investors a total return of 216.4%, well above the 171.1% from the S&P 500 during those same years. Lamar stock also is currently yielding about 3.86% after raising its dividend twice in the past two years.
Image source: Getty Images.
3. Postal Realty Trust
Postal Realty Trust (PSTL 0.37%) claims to be the first and only publicly traded REIT specializing in being a landlord to the post office.
The company has been leasing space to the USPS since the early 1980s and, since going public in May 2019, has grown its property count and revenue sharply, including adding 239 properties in 2021 alone. Postal Realty ended the year with a portfolio of 966 properties in 49 states and an occupancy rate of 99.6%.
Despite its highly public travails, the post office should continue to be a reliable tenant for years to come. In an interview with REIT Magazine, Postal Realty CEO Andrew Spodek points out that total gross lease payments account for less than 2% of USPS expenses and says, "The Postal Service is a government agency that pays its rent on time, rarely moves, and doesn't require the landlord to have on-site property management."
Postal Realty's dividend has delivered, too, as the company recently announced its 10th straight quarterly increase, and the stock is now yielding about 5.23%, much higher than the 1.37% for the S&P 500.
