There are hundreds of real estate investment trusts (REITs). With so many choices, it can be easy to overlook some great options.
Three REITs that are ideal for those seeking to generate passive income are Getty Realty (GTY -0.56%), Plymouth Industrial REIT (PLYM 0.07%), and VICI Properties (VICI -1.05%). All three pay high-yielding dividends that are likely to continue growing in the coming years.
A high-octane dividend
Getty Realty focuses on owning properties where consumers spend money in or on their cars. These properties include gas stations and convenience stores, auto repair shops, car washes, and auto parts stores. The company leases these freestanding retail properties back to operators under long-term triple net (NNN) leases. That lease structure makes the tenant responsible for maintenance, building insurance, and real estate taxes, enabling Getty Realty to generate very stable rental income to support its dividend.
The REIT currently offers investors a 6.2% dividend yield. That's almost double the REIT sector's average and significantly above the 1.6% dividend yield provided by an S&P 500 index fund. Getty Realty can easily support that dividend. It has a conservative 75% payout ratio and a solid investment grade balance sheet. Those features give it the financial flexibility to continue expanding its portfolio.
Getty Realty has invested millions of dollars in acquisitions, development projects, and redevelopments over the years. These investments have helped grow its adjusted funds from operations (AFFO) per share at a 5.6% compound annual rate since 2015, supporting 5.4% compound annual dividend growth. With a large pipeline of investment opportunities and a solid financial profile, the REIT should be able to continue growing its high-yielding dividend in the coming years.
Rents are rising quickly for this REIT
Plymouth Industrial focuses on owning warehouses, distribution centers, light industrial, and small bay industrial properties. The industrial REIT leases these properties to single tenants under long-term NNN leases. That provides it with steady cash flow to support its 5.1%-yielding dividend.
Plymouth also has a solid balance sheet, giving it access to capital to expand its industrial portfolio. In the first quarter of this year, the REIT acquired 38 industrial buildings for $188.4 million. That included purchasing the remaining 80% interest of a Memphis joint venture from its partner.
The REIT is benefiting from strong demand for industrial real estate, enabling it to capture higher market rental rates as existing leases expire. The company signed over 1.3 million square feet of leases in the first quarter at 16.7% above the prior rates. Combined with acquisitions, those rising lease rates gave the company the confidence to boost its high-yielding dividend by 4.8% earlier this year, its second consecutive year of increasing the dividend. Given the growing demand for industrial space, Plymouth's dividend could keep heading higher.
This dividend isn't much of a gamble
VICI Properties is a specialty REIT focused on gaming properties and other experiential real estate. It leases these facilities to casino operators under long-term NNN leases. Those agreements supply it with very stable rental income to support its 4.6%-yielding dividend.
VICI has an excellent dividend growth track record, increasing it in each of the past four years, with its last raise a healthy 9.1%. The REIT also has a solid dividend payout ratio of 75% of its AFFO and a strong investment-grade balance sheet.
Those factors give VICI the financial flexibility to expand its experiential real estate portfolio. It recently closed its acquisition of fellow casino-focused REIT MGM Growth Properties. Meanwhile, it's diversifying into new experiential properties like destination golf experiences. It sees an enormous opportunity to continue acquiring experiential properties from operating companies, which should support continued dividend growth.
Great options for passive income
With so many REITs to choose from, many investors haven't yet discovered Getty Realty, Plymouth Industrial, and VICI Properties -- and they're missing out on some high-quality dividends. All three REITs offer high-yielding payouts supported by durable portfolios and strong financial profiles. Those attractive payouts should continue rising in the future, making these REITs ideal for those seeking to generate passive income.
