I still remember receiving my first dividend payment almost 20 years ago. I was still in grad school and just starting on my investing journey. I had followed the advice of famed investor Peter Lynch in his book One Up On Wall Street by investing in companies I knew. That led me to buy shares of consumer products giant Procter & Gamble, which happened to pay a dividend. While that first dividend payment wasn't much more than a dollar, I loved the idea of receiving income I didn't have to earn by working.
Because of that, I've packed my portfolio with dividend-paying stocks over the years. That has helped me steadily grow my passive income. Last year I reached a milestone by crossing the $10,000 level of dividend income. One of the biggest contributors to my passive income was real estate investment trusts (REITs), at slightly less than a third of my dividend income. Here's a look at some of the REITs that stood out as big-time income-producers for me last year.
Supplying a healthy dose of income to my portfolio
The REIT leading the charge in supplying me with the most passive income was Medical Properties Trust (MPW +0.58%), at more than $500. The healthcare REIT focuses on owning hospitals that it leases to healthcare systems. That strategy has paid big dividends for investors over the years, enabling Medical Properties Trust to grow its payout for nine straight years.
NYSE: MPW
Key Data Points
That dividend growth is one of the reasons why the REIT was such a large contributor to my passive income last year. It has supplied me with more income each year without lifting a finger, which is as passive as it gets. However, I did take an active role in boosting my income from the REIT by buying a few more shares last summer. That was one of several purchases I've made since adding Medical Properties Trust to my portfolio in 2007.
The REIT will undoubtedly supply me with more income in 2022. Medical Properties Trust has already increased its dividend this year. Meanwhile, I purchased a few more shares a couple of months ago. It remains one of my favorite REITs for collecting passive income.
Sometimes money does grow on trees
Another big-time income producer for me last year was Weyerhaeuser (WY +3.33%). The timberland REIT paid me slightly more than $200 in dividends.
NYSE: WY
Key Data Points
One of the reasons this REIT was a big contributor in 2021 is that it shifted its dividend policy the prior year. Weyerhaeuser has a unique framework in the sector. It pays a sustainable fixed quarterly dividend and a variable supplemental annual dividend to deliver on its targeted dividend payout ratio of 75% to 80% of its funds available for distribution (FAD). Weyerhaeuser set this policy because of the volatility of lumber prices.
Last year, lumber prices were strong. Because of that, Weyerhaeuser paid an interim supplemental dividend before the year ended to go along with its quarterly payments.
Meanwhile, I've already collected more in dividends from Weyerhaeuser in 2022 than I did last year. The company paid out a large final variable supplemental dividend early in the year, thanks to the surge in its FAD because of higher lumber prices. In addition, Weyerhaeuser increased its fixed base quarterly dividend payment by 5.9%. While the REIT's variable dividend policy means I can't always count on it being a big-time income producer, it does provide income upside when lumber prices are high.
Towering dividend growth
The final REIT I wanted to highlight is American Tower (AMT +2.26%). While it wasn't my third-largest dividend-paying REIT, it still stood out for the income it produced at over $100. Most of those dividends came from a roughly $1,000 investment I made in the stock about a decade ago. I'm now earning a more than 8% yield on that cost even though the REIT has never offered a high dividend yield.
NYSE: AMT
Key Data Points
The driving factor has been American Tower's impressive dividend growth. The infrastructure REIT has increased its payout at a more than 20% annual rate over the past decade. That's helped grow what was a relatively small dividend when I initially bought shares into a much more meaningful passive income stream.
Earning passive income from real estate the easy way
I've found REITs to be a great place to collect dividend income. They own income-producing real estate, giving them the cash flow to pay attractive and growing dividends. That's why I own several REITs that are supplying me with a meaningful amount of passive income. While I can't retire on my REIT income yet, it's growing each year as these companies increase their payments and I add to my REIT collection.
