Real estate investing has been a long-taken path to prosperity. Investing in the stock market side of that age-old business can be a great way to build wealth without the expense and hassle of direct investment and ownership.
Real estate investment trusts (REITs) are built for just that. These pools of income-producing properties are required to pay out most of their taxable income as dividends and provide a highly liquid way to get in and out of a wide variety of sectors.
That's one more appealing thing about REITs: You can choose your sector. The legendary Fidelity fund manager Peter Lynch preached buying what you understand, and many REITs are an excellent avenue for that approach. That's because many of the 225 or so publicly traded REITs specialize in businesses that average investors can assess on their own as promising and appealing or not so much, given the ever-changing economies we're all navigating.
While these can be considered niche investments, they can be very large niches, as we shall see in this quick look at five REITs to consider for reliable dividend payouts and portfolio diversity.
Image source: Getty Images.
Prologis
Prologis (PLD 0.57%) is the world's largest REIT by market cap (currently at about $115 billion) and the world's largest owner of warehouse space. It has about 1.2 billion square feet of critical logistics infrastructure spread across some 5,500 facilities in 19 countries and a tenant list anchored by the likes of Amazon, FedEx, and Home Depot.
Prologis is considered an industrial REIT, a sector that exploded during the pandemic. Its prospects remain high and vacancies remain low as e-commerce and business-to-business shipping demands continue to grow. It's also raised its dividend for 10 straight years.
American Tower
American Tower (AMT 0.58%) is the second-largest REIT, with a current market cap of about $89 billion. It's a dominant presence in the world of telecommunications, with a portfolio of 225,000 mobile towers, data centers, and other key infrastructure used by all the major carriers and thousands of other customers.
The rising number of cell towers has powered American Tower's growth. Its expanding ability to lease space needed to handle the expansion of 5G networks and the exploding appetite for bandwidth used by artificial intelligence (AI) applications promises to keep this company's coffers full. Investors, meanwhile, have enjoyed 13 straight years of dividend increases.
Vici Properties
Vici Properties (VICI 0.54%) is a spin-off from Caesars Entertainment. It has a portfolio of more than 50 casinos and non-gaming experiential properties, 60,100 hotel rooms, and more than 450 restaurants, bars, and sportsbooks -- where gamblers can wager on sporting events -- across the U.S. and Canada.
These properties include a big chunk of the Las Vegas Strip, including Caesars Palace, MGM Grand, and the Venetian Resort. These are leased back to their operators under very long-term agreements that should continue to keep providing the steady, growing flow of cash that has funded annual dividend increases since Vici's initial public offering (IPO) in 2018.
As the old saying goes, the house always wins. If you buy that, buying Vici Properties is an easy way to own a bit of the house.
Getty Realty
Just as gambling and all that goes with it seems like a sure bet, so does fueling the trip to the casino and everywhere else. Getty Realty (GTY 0.85%) is a good place to plunk down cash on that reality for all of us who own cars and drive.
Getty Realty traces its history back to the old Getty Oil Co. and now owns 1,047 gas stations, convenience stores, and other auto-related stand-alone properties in 39 states and the District of Columbia. These are recession-proof and inflation-resistant operations that have helped Getty Realty pump out 10 straight years of dividend increases.
https://www.marketbeat.com/stocks/NYSE/GTY/dividend/
Postal Realty
If gas station real estate seems like a good place to invest in a captive audience, you might also consider owning a piece of the post office. Postal Realty (PSTL 0.87%) is the only REIT of its kind as the owner of 1,332 postal properties in 49 states.
While nothing is guaranteed, the U.S. Postal Service is an exceptionally reliable tenant, always paying the rent and nearly always renewing its leases. Postal Realty, meanwhile, has delivered dividend increases itself for the past four years.
Data source: YCharts GTY Dividend Yield
Reliable yields from sound businesses in resilient industries
The above chart shows the current yield for these five REITs. It's no coincidence that American Tower and Prologis have the lowest. Yield is annualized dividend divided by share price, and those two REITs have a strong following on both Wall Street and Main Street. This has helped buoy their stock prices, even in tough times, pushing their yields down. The other three are not so well known but are also reliable dividend payers.
That said, these are just a few examples of solid choices among specialized REITs. There are also retail REITs, hospitality REITs, residential REITs, even timberland REITs, and many more besides the diversified trusts that own a combination of property types.
REITs can add a solid stream of income to underpin your portfolio with the solidity that comes with owning real estate. I started investing in sector funds back in the '90s when they became popular and now find REITs an even more-focused way to buy into specific industries.
