I love buying dividend stocks. Not only do they have the potential to grow over time, but more importantly, they earn reliable passive income. Real estate investment trusts (REITs) are my favorite type of dividend stock to buy because they are required to pay at least 90% of taxable income in dividends, earning more income than a traditional dividend stock can offer.
Right now, there are a ton of high-quality REITs that are trading for a major discount due to market volatility. EPR Properties (EPR -0.03%), Medical Properties Trust (MPW -8.68%), and Simon Property Group (SPG 0.05%) all have dividend yields of 6% or more right now -- close to three times more than the dividend return of the S&P 500. If you love dividends like me, here's why right now is the perfect opportunity to stock up on these top real estate stocks.
1. EPR Properties
EPR Properties is a triple net lease REIT, which means it owns and leases a variety of real estate to tenants on a long-term net lease where the tenant is responsible for operating costs and taxes. The company specializes in experiential real estate -- think amusement parks, music venues, movie theaters, eat-and-play restaurants, museums, water parks, etc.
The stock fell hard at the start of the pandemic -- understandably so. People were worried about the future of EPR's portfolio, which consists of roughly 355 experiential properties in 44 states and Canada. But after two years of lockdowns and self-isolation, and a growing number of vaccinated individuals, the entertainment business is back and booming.
Its adjusted funds from operation (AFFO), an important metric that shows the profitability of a REIT, grew by 120% year over year as of the first quarter of 2022. And the summer should continue to be strong for the company as people work through their pent-up demand for fun. That should push its performance even higher.
Its share prices haven't caught up with its current performance, as it's still down 36% from its pre-pandemic levels. But investors can use this to their advantage by loading up when the market is down and earning a nearly 6% dividend return while they're at it.
2. Medical Properties Trust
Medical Properties Trust's name is a pretty clear giveaway for what the company does -- it invests, owns, and leases medical properties. Of its 440 healthcare properties, the majority are hospitals, making it the largest hospital operator in the world.
Thanks to lower hospitalization rates due to COVID-19, demand for hospital care has begun to normalize, and so have Medical Properties Trust's earnings. Its metrics were up notably in the first quarter of 2022, but that was due to the gain from sales and recapture of depreciation, not necessarily higher revenues.
But the great thing is that hospitals are a necessity-based business. People will always need medical care, making its tenant base and its income extremely reliable. The healthcare REIT has increased its portfolio by 122%, growing from $10 billion in assets in 2018 to $22 billion today. And it has maintained nine years of consistent dividend increases, with its current dividend yield sitting at just over 7%.
3. Simon Property Group
Simon Property Group is the largest mall operator in the world, having ownership and interest in over 200 malls and outlet centers in the United States, Asia, and Europe. Malls were the mecca for shopping for decades. But with the rise of e-commerce, interest in malls slowly started to fade. The pandemic squandered what hope remained as major retailer after major retailer filed bankruptcy, eventually leading Simon to purchase a few of its major tenants. But now that the world is reopening, it seems malls are far from dead.
Mall foot traffic is up, and Simon's occupancy has steadily climbed, now sitting at 93.3%. Despite the positive news, investors don't seem swayed. Its share price is down nearly 40% from pre-pandemic levels, the major reason for the company's super-attractive 8% dividend return.
However, one thing investors are failing to realize is that even if malls don't return to their glory days, Simon has enough capital to be able to pivot. The company has already discussed the idea of turning space into distribution centers or omnichannel solutions. But it's also finding new innovative ways to make shopping easier for consumers, which should promote higher conversions for its tenants and bring more business to its malls. Either way, its price today is a steal, given the quality of its portfolio and the return of its dividend.
