Warren Buffett's Berkshire Hathaway is about to lose one of its higher-yielding dividend stocks. STORE Capital (STOR), a real estate investment trust (REIT) with a high dividend yield, has agreed to be taken private by GIC and Oak Street. Because of that, Berkshire and other investors relying on STORE to supply them with passive income will need to find a replacement. 

Two excellent options for dividend-seeking Buffett followers to consider are Realty Income (O 0.94%) and W.P. Carey (WPC 1.76%). Here's why investors who own STORE should consider rolling their proceeds into one of those two excellent dividend-paying alternatives.

Ringing the register

GIC and Oak Street have agreed to acquire STORE Capital in an all-cash transaction, valuing the REIT at $14 billion. They're paying $32.25 per share in cash. That price represents a premium of 20.4% to the REIT's stock price the day before the deal's announcement and a 17.8% premium to its stock price over the last 90 days.

The buyers are acquiring a REIT focused on single-tenant operational real estate. It owns over 3,000 properties across the U.S., net leased (NNN) to tenants in the manufacturing, service, and service-oriented retail sectors. It focuses on profitable properties on a unit-level basis, making them operationally critical to the tenant.

That focus on profitability and stable net leases, where the tenant is responsible for covering maintenance, real estate taxes, and building insurance, are factors that drew Warren Buffett to buy shares. They enhance its ability to pay a steadily growing dividend. 

Berkshire Hathaway initially invested $377 million into STORE Capital in 2017, acquiring a 9.8% stake in the REIT. While Buffett's company has since pared down its position, Berkshire reported owning nearly 7 million shares at the end of the second quarter. That's about 2.5% of STORE's outstanding stock, valued at more than $185 million before the acquisition announcement, which is about 0.1% of Buffett's portfolio.

What should investors do next?

STORE Capital expects its deal with GIC and Oak Street to close early next year. It's worth noting that STORE Capital has 30 days to seek a potentially higher offer. However, under the terms of the current transaction, STORE Capital will pay a dividend for the third quarter and then suspend further payouts. Because of that, income-seeking investors will eventually need a replacement, unless another REIT outbids the current buyers.

Realty Income is an excellent option to consider. Like STORE Capital, it's a net-lease REIT focused on owning operationally critical single-tenant properties. It has a much larger portfolio of over 11,400 properties across the U.S. and Europe that's leased to tenants in 72 industries, primarily in the retail and industrial sectors.

Realty Income shines in its ability to pay a steadily growing dividend. The REIT has increased its payout 117 times since its public-market listing in 1994. Realty Income also stands out for its monthly dividend. It currently yields 4.6%, making it a fairly even trade for investors cashing out of STORE Capital, since the roughly 20% buyout premium will push its implied dividend yield down to 4.8%.

Depending on their initial cost basis, investors could collect a similar amount of passive income by reinvesting the cash they receive from the STORE deal into Realty Income. Meanwhile, that income stream will likely grow as Realty Income expands its real estate portfolio.

W.P. Carey is another excellent option for income seekers. It offers a slightly higher initial dividend yield, currently around 5%. It provides more diversification than STORE and Realty Income, with a portfolio of operationally critical real estate in the retail, office, warehouse, industrial, and self-storage sectors, secured by net leases. That diversification helps reduce risk while giving it a broader opportunity set for potential acquisitions.

W.P. Carey also has an excellent track record of growing its dividend. The diversified REIT has increased its payout every year since it came public in 1998. The company has a solid financial profile, giving it the flexibility to continue expanding its portfolio so it can keep growing the dividend.

Don't fret that Buffett's only REIT is getting acquired

STORE Capital's decision to sell itself for cash will see investors lose a lucrative passive income stream. While it won't dent Warren Buffett's dividend income that much since STORE is a small piece of Buffett's massive portfolio, it likely represents a much larger income loss for other investors. 

The good news is that there are some excellent potential replacements in Realty Income and W.P. Carey. Both offer attractive dividends backed by similar real estate that they should be able to continue growing for years to come. That makes them great options for current STORE Capital investors who want to continue earning passive income from real estate.