The emerging bull market has put many investors' focus back on growth stocks -- and for good reason. Identifying opportune buys among companies positioned for sustained growth is a well-proven way to build wealth, and the beginning of a stock market run can be a great time to jump aboard.
Yet this also is a good time to look at income stocks, which are typically viewed as more defensive, but still represent investments in businesses in sectors with the secular tailwinds to have some nice growth potential of their own.
Two to consider here are American Tower (AMT -0.70%) and Realty Income (O -0.17%). These are both real estate income trusts (REITs), a corporate structure that mandates they pay out at least 90% of their taxable income as dividends to shareholders each year.
As important, they're both established leaders in their particularly resilient and promising sectors -- essential retail real estate and digital communications infrastructure.
Since we're talking about long-term investments, here's what a $250 stake taken in each of them 25 years ago would be worth today. (America Tower went public in 1998, while Realty Income did in 1994.)
O Total Return Level data by YCharts
The SPDR S&P 500 ETF Trust is included here to benchmark these two REITs against an exchange-traded fund that represents the greater market. Of course, history says you would probably do just fine investing your money in a big benchmark index fund, which avoids the hassles and risks of picking and tracking individual stocks.
But American Tower and Realty Income are both widely held, closely followed companies that have become benchmarks themselves for their industries, and both look positioned for the kind of sustained growth that makes them ideal long-term investments that don't have to be followed daily if you're not so inclined.
American Tower can still elevate a portfolio
American Tower is the second-largest publicly traded REIT. With a market cap of $94 billion, it trails only logistics space giant Prologis, which now boasts a valuation of $119 billion or so.
More importantly, American Tower owns one of the world's largest collections of multitenant communications real estate, leasing must-have space on traditional cell towers, at small antenna sites, and in data centers at about 225,000 locations around the world.
Thousands of private and public companies, government agencies, and other organizations depend on this Boston-based infrastructure REIT to help them support the world's ever-growing appetite for wireless bandwidth. Meantime, you can pick up shares for about $202 each and enjoy a yield of about 3.4%, buttressed by 12 straight years of dividend increases.
Realty Income provides the essentials
In a sense, Realty Income occupies the other end of the technology spectrum, providing brick-and-mortar retail space to tenants in such necessity businesses as big box retailers, dollar stores, supermarkets, and in the past couple of years, even casinos.
San Diego-based Realty Income has been aggressively growing through acquisitions, including a just-closed $9.3 billion deal for Spirit Realty, a Dallas-based REIT that owned more than 2,000 retail, industrial, and other properties in 49 states.
That purchase pushed Realty Income's portfolio to more than 15,000 properties, which will help it increase the income it needs to continue building on a record of more than 650 straight months of payouts for the "Monthly Dividend Company." Indeed, this retail REIT is on a streak of 31 years of annual increases and currently yields about 5.5% at a share price of about $55.
Left behind for now, these are good long-term buys
The chart above shows how much Realty Income and American Tower share prices have trailed the S&P 500 during the past year, despite their recent rallies.
But they also appear poised to grow -- both in the short term once interest rates start falling (REITs are particularly sensitive to interest rate movements since they finance so much of their growth by borrowing) and in the long term because of their powerful positions in the sectors they occupy.
Take your $500 and split it evenly between these two real estate dividend stocks, and watch them grow. Just don't feel like you have to check on them constantly. They'll be fine.
