5 Top Dividend Stocks You Can't Afford to Overlook

When most people think about dividend stocks, they see them as a source of passive income. However, that's not the only thing they bring to the table. They can also deliver price appreciation as they grow their earnings and dividends. Add up the dividend income and price appreciation, and many dividend stocks outperform the broader stock market's total return. 

Five top dividend stocks with a history of producing exceptional total returns are CubeSmart (CUBE -0.83%), Duke Realty (DRE), Equity LifeStyle (ELS 0.86%), Extra Space Storage (EXR -1.40%), and SBA Communications (SBAC -0.14%). Over the last decade, they have been the five highest performers in the dividend-heavy real estate investment trust (REIT) sector. With plenty of capacity to continue producing leading total returns in the coming years, investors won't want to overlook these REITs.

Storing up value for investors

CubeSmart is a self-storage REIT. It has delivered excellent performance over the last decade, with total returns of around 425%. That's more than double the S&P 500's approximately 200% total return and good for fifth best in the entire REIT sector. CubeSmart has benefited from the growing demand for self-storage space.

It has the second-fastest growth rate in the self-storage space, expanding its funds from operations (FFO) per share by about 350% while growing the dividend by 437.5%.

That catalyst and its financial flexibility should enable the REIT to continue growing its same-store net operating income and portfolio in the coming years. Those drivers should allow it to keep boosting the dividend and producing attractive total returns.

Going off the beaten path

Equity LifeStyle has produced a more than 425% total return over the last decade, putting it fourth in the REIT sector. The residential REIT, which focuses on manufactured home communities, RV resorts and campgrounds, and marinas, has benefited from several growth drivers. It has steadily increased rental rates at its properties while expanding its portfolio by acquiring additional properties and developing more sites at its existing locations. That's helped drive 9.1% compound annual FFO per share growth since 2006 while enabling the company to grow its dividend at a 22% yearly rate.

Equity LifeStyle has a strong balance sheet, which should enable it to continue expanding its portfolio in the future. Along with rising net operating income from its existing properties, those future additions should enable Equity LifeStyle to continue growing its FFO and dividend, which should help it produce strong total returns. 

Even stronger together

Duke Realty produced the third-best total returns in the REIT sector over the last 10 years at around 450%. Some of that came from the big premium offered by fellow industrial REIT Prologis (PLD -1.69%), which agreed to acquire Duke in a $26 billion all-stock deal. While Duke will soon become part of Prologis, the combined company looks like an excellent investment. Prologis expects the deal to be accretive to its FFO. Meanwhile, it anticipates the combined company will continue growing its FFO and dividend in the future, supported by strong rent growth and development projects. Because of that, the Duke/Prologis combo could be a big winner in the coming years.

Towering returns

SBA Communications clocks in as the second best-performing REIT over the past decade at a nearly 500% total return. The infrastructure REIT has benefited from the growing demand for communications infrastructure like cell towers. That has enabled it to grow its FFO and dividend at healthy rates. 

The REIT has lots of financial flexibility, allowing it to pay higher dividends, repurchase shares, build new infrastructure, and make acquisitions. These value-enhancing moves should enable SBA Communications to continue growing value for its shareholders in the future.

The leader of the pack

Extra Space Storage delivered best-in-class returns over the last ten years of roughly 700%. A big driver has been the self-storage REIT's ability to grow its FFO per share at a peer-leading pace, enabling it to deliver outsized dividend growth. Since 2011, Extra Space Storage has increased its FFO per share by nearly 700%. That has enabled the REIT to boost its dividend by 650% during that timeframe.

The company has benefited from steadily rising demand for storage space, its sector-leading third-party management operations, and a steady stream of new investments. With a strong financial profile and brand, Extra Space should be able to continue growing its FFO, the dividend, and shareholder value in the coming years.

The potential to continue outperforming

Investors often only consider dividend stocks if they're seeking income. However, companies that can grow their earnings and dividends have historically produced big-time returns. That's evident in the five best-performing REITs over the last decade, which all more than doubled the return of the S&P 500. While they might not deliver that same level of returns over the next decade, these REITs should be able to produce strong returns in the coming years. Because of that, investors won't want to overlook these dividend stocks any longer.