The real estate investment trust (REIT) sector is massive. According to the National Association of REITs (Nareit), there are currently 191 publicly traded REITs. They have a combined market capitalization approaching $1.5 trillion.
Given the sector's size, it's impossible to know about every REIT. Instead, investors should focus on the best the industry has to offer. Here are three REITs that every investor should know about.
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Federal Realty Investment Trust
Federal Realty Investment Trust (FRT 1.51%) stands out in the REIT sector for doing one thing exceptionally well. It has increased its dividend for an industry-leading 58 straight years. That qualifies it as a Dividend King, a company with at least 50 years of consecutive annual dividend increases. It's the only REIT that has reached Dividend King status.
The company focuses on investing in quality over quantity. It owns 104 high-quality open-air retail and mixed-use properties in the top suburban markets densely populated with high-income households. Despite being in business for more than six decades, Federal Realty has a much smaller portfolio than other retail REITs (e.g., Kimco owns 565 shopping centers and mixed-use assets).
NYSE: FRT
Key Data Points
Federal Realty routinely upgrades its portfolio. It sells mature properties with lower rent growth upside to recycle capital into new properties with greater growth potential, and to fund redevelopment and expansion projects at its other properties. For example, it has sold $328 million of properties over the past few months, which helped fund the $340 million it spent on two new properties. It also announced plans to invest up to $120 million in the redevelopment of another property. This strategy of investing in quality over quantity should enable Federal Realty to continue increasing its dividend.
Realty Income
Realty Income (O +0.35%) is the world's sixth-largest REIT with over $61 billion in real estate across nine countries. It's a global leader in net-lease real estate (properties secured by long-term triple-net leases, under which tenants cover all property operating costs). The landlord has a diversified portfolio consisting of over 15,500 retail, industrial, gaming, data center, and other properties leased to many of the world's leading companies, including FedEx, Walmart, and Home Depot.
NYSE: O
Key Data Points
Net-leased properties provide very stable rental income. That enables Realty Income to pay a dependable monthly dividend. The REIT steadily increases its dividend. It has raised its payment for more than 30 straight years, including the past 113 quarters in a row.
New investments are the primary driver of the REIT's growing dividend. Realty Income spends billions of dollars each year to acquire stabilized properties and invest in build-to-suit development projects. It sees a massive $14 trillion opportunity to invest in net lease real estate across the U.S. and Europe.
Prologis
Prologis (PLD 1.86%) is one of the world's largest REITs. It owns interests in nearly 5,900 buildings in 20 countries. The REIT has over $215 billion in assets under management, including properties it owns outright and those held in investment funds it manages.
NYSE: PLD
Key Data Points
Prologis primarily invests in warehouses. These logistics properties are vital to supporting the global economy. A staggering $3.2 trillion in goods flows through its distribution centers each year, representing 2.9% of global GDP.
The REIT has also begun investing in data centers to support the massive $7 trillion in investment needed for this digital infrastructure. Prologis estimates it could invest between $30 billion and $50 billion in developing data centers over the next decade, creating up to $25 billion in value for its investors.
The company's investments to grow its portfolio should enable it to continue increasing its dividend. Prologis has grown its payout at a 13% compound annual rate over the last five years, more than double the REIT sector's average of 6%.
These top REITs deliver durable and growing dividends
Federal Realty Investment Trust, Realty Income, and Prologis are three of the top REITs. They have long histories of growing shareholder value, including steadily increasing their dividends. That makes them ideal REITs to buy and hold long-term.
