Investing in real estate is widely considered to be an excellent way to generate passive income. There are many ways to do it, even for those who don't have much money to start. One of the easiest is to invest in a real estate investment trust (REIT). These companies own income-producing real estate and pay a portion of that income to investors via dividends, making them extremely passive real estate investments.
REITs are very low-cost investments. You can often buy shares of a high-quality REIT for less than $100. Three REITs with magnificent records of paying dividends are Realty Income (O 1.70%), Agree Realty (ADC 1.80%), and Vici Properties (VICI 1.14%). They should supply investors with an attractive and growing income stream that could last a lifetime.
An income-producing juggernaut
NYSE: O
Key Data Points
Realty Income has done a masterful job of paying dividends over the years. The diversified REIT (retail, industrial, and gaming properties) recently declared its 647th consecutive monthly dividend. That payment was 2.1% higher than the previous level, marking its 107th straight quarterly increase.
The new payment level pushed Realty Income's forward dividend yield up to around 5.8% at the recent share price. That implies investors would earn about $58 of annual dividend income for every $1,000 they invest in the REIT. However, with a share price recently in the mid-$50s, investors don't need much money to start generating passive income from Realty Income.
Realty Income should be able to continue increasing its dividend in the future. The company estimates it can grow its adjusted funds from operations (FFO) per share by around 2% annually from a combination of rent growth and new investments funded with retained cash after paying dividends. It can boost its FFO growth rate by around 0.5% per share each year for every $1 billion of externally funded acquisitions it completes (i.e., those financed with stock sales and additional debt). Realty Income has historically acquired billions of dollars of income-producing real estate each year. That drives its belief that it can grow its adjusted FFO per share by around 4% to 5% annually. That will provide it with the incremental cash flow to continue increasing its high-yielding dividend.
Plenty of room to continue growing
NYSE: ADC
Key Data Points
Agree Realty is a retail REIT focused on low-risk properties. It owns freestanding retail properties net leased or ground leased to high-quality retailers (68.8% of its rent comes from investment-grade tenants). Those lease structures and the credit quality of its tenants enable Agree Realty to collect very stable rental income.
The REIT pays investors about 75% of its steady rental income via a monthly dividend, currently yielding around 5%. Agree Realty has done a fantastic job growing its dividend. It has delivered 5.6% compound annual dividend growth over the last decade.
Agree Realty's payout should continue rising. The REIT has a strong balance sheet, which gives it lots of financial flexibility to continue investing in income-producing retail properties. It has also built relationships with financially strong retailers, which supply it with a steady stream of new investment opportunities. The company's existing partners own over 165,000 properties that Agree Realty could acquire in the future. That gives the REIT (which currently owns less than 2,200 properties) a long growth runway.
Peer-leading dividend growth
NYSE: VICI
Key Data Points
Vici Properties is a REIT focused on experiential real estate, such as casinos and entertainment centers. It leases these properties to the operators under long-term net leases. Those agreements provide it with very stable and growing cash flow as lease rates escalate.
The company pays out about 75% of its adjusted FFO via a dividend currently yielding more than 5.5%. Vici Properties has grown its payout at a peer-leading 7.9% compound annual rate since 2018 (several times faster than its peer group average of 2.2%).
Vici Properties should be able to continue growing its payout in the future. It partners with companies that operate experiential real estate, which provides it with a steady stream of new investment opportunities. The REIT often acquires a portion of an operator's real estate and receives the option to buy more in the future. Vici also funds development projects and receives the option to purchase those properties in the future. The company maintains a strong balance sheet, which gives it the flexibility to continue making new investments.
Durable dividend stocks
Realty Income, Agree Realty, and Vici Properties have done phenomenal jobs in paying dividends over the years. The REITs focus on lower-risk properties that generate steadily rising rental income. They also have strong balance sheets. Because of that, they have been able to expand their portfolios and pay growing dividends, which should continue in the future. That makes them great stocks to buy for those seeking long-lasting income streams.
