While the Federal Reserve has been increasing interest rates this year, the average income yield on most investments isn't very high. The 10-Year U.S. Treasury yield is currently around 3.4%, while most bank CDs are still below 1%. Meanwhile, despite the sell-off in the stock market, the dividend yield on the S&P 500 is around 1.6%.
However, many dividend stocks offer higher yields, enabling investors to generate more income for every dollar they invest. Three dividend stocks that stand out as great income producers these days are Digital Realty (DLR 0.95%), Realty Income (O -0.17%), and VICI Properties (VICI -0.28%). These real estate investment trusts (REITs) offer higher-yielding dividends that they'll likely continue increasing in the future.
Data-driven dividend growth
Digital Realty's dividend yield is currently around 4.1%. The data center REIT has an exceptional dividend track record. The company gave its investors a 5% raise earlier this year. That marked its 17th straight year of increasing its dividend. Digital Realty has given its investors a raise every year since its initial public offering in 1994, putting it in a select group of REITs.
Digital Realty should be able to continue growing its payout in the future. The REIT's CEO, William Stein, noted that "demand for data center solutions continued to be strong through the second quarter." Accordingly, the company has already pre-leased half of its development pipeline. It's currently working on a record backlog of 41 projects across 18 metro areas. As this new capacity comes online, it should help grow Digital Realty's cash flow, giving it more cash to support the dividend.
The REIT also continues to make strategic growth investments. It recently closed its deal to buy a majority interest in Teraco, a leading data center provider in South Africa. The company has a solid balance sheet, giving it the flexibility to continue expanding its portfolio as attractive opportunities arise. That should enable Digital Realty to keep growing its dividend each year for the foreseeable future.
Build for long-term income growth
Realty Income's dividend yield currently clocks in at 4.4%. The REIT has an even more impressive dividend track record. It has declared 626 consecutive monthly dividend payments since its formation more than five decades ago. Meanwhile, it has increased its dividend 116 times since its public market listing in 1994, including in each of the last 99 straight quarters. That's over 25 years of consecutive dividend growth, qualifying it as a Dividend Aristocrat.
The REIT shouldn't have trouble continuing to grow its dividend in the future. It focuses on buying income-producing real estate leased to operating tenants in resilient industries like grocery stores, health and fitness, and logistics.
The company has one of the strongest financial profiles in the REIT sector, giving it the flexibility to continue buying real estate. It's one of only seven REITs in the S&P 500 with A-rated credit from two or more rating agencies. Meanwhile, it sees an enormous opportunity to continue acquiring real estate from owner-operators, estimating there are $12 trillion of properties in its core North American and European markets. Future acquisitions will grow its portfolio, providing more rental income to increase the dividend.
Delivering a great dividend experience
VICI Properties' dividend also currently yields 4.4%. The company has significantly boosted that payout since its formation in 2018, increasing it by more than 9% in three of those four years.
The REIT expects to continue growing its dividend as it expands its experiential real estate portfolio. It recently completed a transformational deal, acquiring fellow gaming REIT MGM Growth Properties for $17.2 billion. The transaction added 15 properties and boosted its annual rental income by over $1 billion. VICI has made several other deals this year, including expanding into the destination golf experience sector and its relationship with indoor waterpark operator Great Wolf Resorts.
VICI Properties expects to continue expanding its portfolio in the future. It has several growth drivers, including the right of first offer on some gaming properties and the ability to continue expanding into the leisure and experiential real estate sectors. Future investments should enable VICI to continue growing its rental income and dividend.
Great income streams for the long term
Digital Realty, Realty Income, and VICI Properties offer investors high-yielding dividends secured by income-producing real estate. Thanks to their strong financial profiles, all three REITs should be able to continue expanding their portfolios and payouts in the future. That makes them great income stocks to buy and hold for the long haul.
