The current bull market has provided some very nice returns for investors in growth stocks, which are once again in favor.
But that also makes now a good time to consider bolstering your portfolio with dividend producers such as real estate investment trusts (REITs). Many of them are historically stable stocks that have not been part of the recent run-up in share prices.
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Three of my favorites have long been Alexandria Real Estate Equities (ARE 3.32%), American Tower (AMT 2.42%), and Realty Income (O 1.89%).
These companies operate in different sectors but share common traits that make them attractive for long-term investment. That includes in-demand properties, a history of stable earnings, strong management teams, and a commitment to returning profits to shareholders through dividends. In fact, as REITs, that's their obligation under tax law.
Trailing the market...for now
These three REITs have badly trailed the rest of the market, and REITs in general have lagged as investors continue to wait for expected interest rate cuts. The S&P 500, for instance, is up about 30% during the past year, while Alexandria is up less than 5%, American Tower is down about 2%, and Realty Income is off by about 12%.
But as the income portion of a stock portfolio, it's not just about the share price. These charts show the growth in dividends and total return for Alexandria, American Tower, and Realty Income in the past 10 years.
ARE Dividend data by YCharts
Here's more on each.
1. Alexandria Real Estate Equities
Alexandria is an office REIT, but it's not like other companies in this challenged sector. It has some 73 million square feet of high-demand lab and related office space occupied or under development in what it calls collaborative campuses in and around Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and the Research Triangle area in North Carolina.
Big pharma, universities, and other institutions underpin a broad client roster, which includes companies engaged in creating in-demand, life-saving drugs and treatments like Moderna, Eli Lilly & Company, and AstraZeneca.
Analysts have an average target price of $137.13, about 9% above the current share price of about $125. The current yield is a respectable 4% and the trust is riding a streak of 14 straight years of dividend boosts.
2. American Tower
American Tower owns a global network of more than 225,000 cell towers, tiny antennas, and data centers that it leases to thousands of traditional and high-tech companies, government agencies, and other organizations. Its largest tenants are the mobile giants Verizon, AT&T, and T-Mobile.
After a dozen years of annual dividend increases, American Tower just cut its quarterly payout from $1.70 per share to $1.62. But that's not a reason to panic or sell. It has a powerful presence in one of the ultimate must-have markets for real estate income: telecommunications and digital infrastructure.
American Tower is currently selling for about $196 per share and yielding a healthy 3.3%. Also healthy is the 11% upside reflected in analysts' average target price of $217.55 for this closely followed stock.
3. Realty Income
Realty Income is a particularly popular, widely held dividend stock, and for good reason. It's on a run of 645 consecutive monthly dividends, and has raised its payout 124 times since it went public in 1994. Revenue comes from a collection of more than 15,000 properties, which are leased to a long list of reliable brand-name retailers in the U.S. and in Europe.
At the time of writing, Realty Income is yielding a very nice 5.9% and trading at a share price of about $53. Analysts give this largest of retail REITs an average target price of $60.96, pointing to some upside that long-term investors can realistically anticipate while they continue to enjoy a steady stream of investment income.
Good potential and steady income at a nice price
Each of these REIT stocks offers a balance of potential growth and reliable income, making them a valuable addition to any long-term investment portfolio. They also haven't participated in the greater bull market, so now may be a particularly propitious time to pick up some shares.
