Investing goals tend to change over time. Although many focus on creating wealth, preserving it is an underrated part of the journey. Dividend stocks that pay you for holding shares are an excellent tool for wealth preservation, and come with perks like the ability to cover your expenses or reinvest your dividends to grow your dividend income.
But instead of looking at traditional stocks, consider real estate investment trusts (REITs). These are real estate companies designed to generate income for shareholders. Here are five great examples to start your search.
1. Realty Income
Retail REIT Realty Income (O 0.64%) acquires and rents out single-tenant retail buildings in the U.S. and Europe. It's one of the largest REITs in its industry, with about 11,400 commercial properties that generate $3.1 billion in annualized rent. Realty Income does net leases, where the tenant is responsible for taxes, insurance, and upkeep.
O FFO Per Share (TTM) data by YCharts
The company is a Dividend Aristocrat, an S&P 500 company that's raised its dividend for at least 25 consecutive years. Over the past year, the company generated $3.70 per share in cash profits, referred to as funds from operations (FFO), easily funding its $2.84 per share in dividends. Unlike most companies, it pays a monthly dividend.
2. American Tower Corporation
Many of the land and structures that support cell towers and other communications equipment aren't owned by the operators, but by American Tower Corp. (AMT 1.17%). The company owns 222,000 communications sites around the world. These properties are mission-critical to telecom and broadcasting companies, which makes them reliable tenants for American Tower.
AMT FFO Per Share (TTM) data by YCharts
American Tower became a REIT in 2012 and has grown immensely over the past decade. The dividend yield won't knock your socks off at 2.1%, but it's outperformed the S&P 500 over the past decade and has a dividend payout ratio of 41%. More dividend growth is almost a given over the coming years.
3. Innovative Industrial Properties
Cannabis has become a rapidly growing industry as legalization spreads across America. However, its federal legal status prevents operators from accessing traditional funding. Innovative Industrial Properties (IIPR 1.10%) has stepped in by acquiring properties from operators and renting them back, giving them much-needed cash to run their businesses.
IIPR FFO Per Share (TTM) data by YCharts
Innovative Industrial Properties hasn't been around as long as the other REITS listed; it went public in 2016 as the first cannabis REIT to do so. The stock offers a hefty 7.5% dividend yield currently covered by nearly $7 in FFO per share, a payout ratio of 82%. A recession could squeeze the company's tenants, but the company collected 99% of rent through the first half of 2022, so that hasn't been a problem yet.
4. Federal Realty Investment Trust
Retail REIT Federal Realty Investment Trust (FRT -2.76%) rents out large commercial spaces like open-air shopping areas and mixed-use properties in the suburbs of major metropolitan markets around the U.S. These outer rings, as management calls them, are higher-income regions with a lot of customer traffic, which makes them more resilient in economic downturns.
FRT FFO Per Share (TTM) data by YCharts
The strategy has worked -- the company is a Dividend King, and recently announced its 55th consecutive dividend increase. Investors can confidently hold Federal Realty Investment Trust after the pandemic stress tested the company. You can see above how much the pandemic hurt profits, but the company still managed to pay and raise its dividend.
5. National Retail Properties
Retail REIT National Retail Properties (NNN 0.53%) rents out single-tenant retail properties, focusing on e-commerce-resistant, quick-service businesses like fast food chains, car washes, and convenience stores. The company owns more than 3,200 properties across 48 states. Like Realty Income, the company uses a net-lease model, putting the day-to-day expenses of occupying a property onto the tenant.
NNN FFO Per Share (TTM) data by YCharts
While National Retail Properties isn't technically a Dividend Aristocrat, meets the same criteria: The company has raised its dividend for 33 consecutive years. Management strategically maintains a 66% dividend payout ratio to give the business a margin of safety. It's worked -- the company endured the pandemic, one of the most challenging environments for a real estate company in history. Investors can confidently buy shares as part of a diversified dividend stock portfolio.
