When you start investing, it is very tempting to throw money at the hottest craze, like meme stocks or cryptocurrencies. But the get-rich-quick feeling that generally leads to such moves can also lead you into risky investments and potentially painful losses of capital.

A better approach is to build a solid foundation of reliable dividend-paying stocks, like real estate investment trusts (REITs) W.P. Carey (WPC 0.27%), Federal Realty Investment Trust (FRT 0.71%), and UDR (UDR 1.66%).

1. W.P. Carey: Spreading your bets

You'll make the most money if you put every penny you own into a single winning stock. But there's really no way to know which stocks will be winners or losers, which is why a strong investment approach involves diversification.

The thing is, what's good for your portfolio is also good for a REIT's portfolio, which is why W.P. Carey spread its bets around the industrial (26% of rents), warehouse (24%), office (19%), retail (18%), and self-storage (5%) sectors. A fairly large "other" category rounds out the portfolio. On top of that, it generates 37% of its rents from outside the United States, mostly from Europe. It is one of the most diversified REITs you can own.

The proof of W.P. Carey's success is in its dividend. The yield is a generous 5% today. However, the real story is that the REIT has increased its dividend every single year since its initial public offering in 1998. The key here, however, is that the REIT's core business model is opportunistic, and it has proven that its diversified portfolio supports that effort. If you are looking to own just one REIT, W.P. Carey should be strongly considered.

2. Federal Realty: Slow and steady

Federal Realty's claim to fame is that it has increased its dividend annually for 54 consecutive years, which makes it a Dividend King. That streak also happens to be the longest in the REIT sector, making this strip mall landlord a massive standout for investors who appreciate consistency. The yield today is a solid 4.5%.

Federal Realty owns around 100 properties, focusing on locations that are near sizable population centers, sporting high average incomes. It works hard to ensure its properties are well maintained, investing heavily in redevelopment as a way to increase value over time.

The company also generates around a third of its rents from large mixed-use developments, which include retail, office, and residential properties. The development of these projects play out over years, sometimes decades, creating a strong pipeline for growth even if the broader market or economy is weak. 

To be fair, owning shopping centers with grocery stores in them (which describes about 75% of the company's portfolio) is not exciting. But as Federal Realty's dividend record shows, it can be very rewarding and, notably, provide a solid core to a more diverse portfolio.

3. UDR: The homestead

UDR is different from W.P. Carey and Federal Realty in one key way: It cut its dividend in 2010. But there's an important backstory here, because that cut was related to a notable business shift.

Historically, UDR focused on lower-quality apartments that it would spruce up over time. It started to add in better locations in more desirable markets and, eventually, decided to jettison its lesser assets so it could focus entirely on better properties in better markets.

When UDR did that, it also cut the dividend since it was, basically, resetting its business model. Since that cut, the dividend has been increased annually, even during 2020 when the pandemic had investors worried about apartment owners.

There are plenty of apartment REITs, but UDR's most compelling attribute is that it has a highly diversified portfolio. So it owns properties in and around big cities, as well as more rural assets in fast-growing Sun Belt markets. That helps to smooth out performance over time, as the dividend hike in 2020 shows, and allows investors to own just one apartment REIT instead of having to cobble together multiple names to fully cover the investible market.

The yield today is around 3.4%. To be fair, it may not be the best apartment REIT you can own when looking individually at either yield or growth, but it probably offers the best combination of the two. And that's just the type of foundational asset a new investor will want to build on.

The income building block

Capital gains excite most people, while dividends make most people yawn. However, if you build a solid dividend portfolio, the passive income you create can help you build a lot of wealth over time. W.P. Carey, Federal Realty, and UDR are just the sort of solid, boring dividend payers that help you retire rich even if you never mention them to your friends because they aren't as sexy as meme stocks.