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3 Top REITs to Buy With Dividends Above 5%

Feb 27, 2021 by Matt Frankel, CFP
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A high dividend yield is great, but a high dividend yield that's sustainable is even better. And if the company also has lots of room to grow, that's the trifecta.

One sector where you're likely to find stocks that check all three boxes is real estate, and specifically in real estate investment trusts, or REITs. There are some REITs that currently have dividend yields in excess of 5% that have plenty of room to grow their business for decades to come. Here are three in particular that could be worth a closer look right now.

3 top REITs with dividends over 5%

I won't keep you in suspense. Here are three excellent REITs with dividend yields greater than 5%, followed by why each one could be worth a closer look right now.

Company (Symbol) REIT Category Dividend Yield
Physicians Realty Trust (NYSE: DOC) Healthcare 5.3%
Iron Mountain (NYSE: IRM) Storage 7.1%
MGM Growth Properties (NYSE: MGP) Hospitality 5.8%

Data source: CNBC. Dividend yields as of 2/26/2021.

Physicians Realty Trust

Physicians Realty Trust is a healthcare REIT that specializes in medical office properties, particularly those located on the campuses (or that are affiliated with) major health systems. The company owns about 270 properties and has grown impressively in less than eight years as a publicly traded company.

However, the current portfolio (which represents about $5 billion worth of real estate) could be just a starting point. Physicians Realty Trust plans to leverage its relationships with physicians and healthcare systems to continue to find excellent investment opportunities. The vast majority of medical office properties in the United States are not REIT-owned, so there's plenty of room to expand. In fact, Physicians Realty Trust estimates there are $250 billion to $300 billion worth of medical office properties in the U.S. that fit into the company's investment criteria.

As far as the dividend goes, the current payout is well covered by the company's funds from operations, and there's no reason to think this will change anytime soon.

Iron Mountain

When it comes to records storage and management, there's Iron Mountain -- and then there's everyone else. The company is in a class all by itself when it comes to its core business of storing sensitive records for enterprise customers. More than 225,000 companies around the world, including 95% of the Fortune 1000, trust Iron Mountain to keep their information secure and readily accessible.

Iron Mountain operates 1,450 facilities in 50 countries around the world and also has several records services businesses -- for example, you may know Iron Mountain's name from the mobile shredding trucks you've seen.

The problem is that storage of physical records is a business that's going to gradually decline going forward. The world is gradually going digital, and there's nothing Iron Mountain can do to change that. But it can adapt.

Iron Mountain has quietly been getting into the digital records storage business and building a portfolio of data center properties, which should help ensure the company's future success. After all, its brand name is synonymous with records security, and with such a massive customer list, there's no reason it can translate its success to its digital business.

MGM Growth Properties

Last but not least, MGM Growth Properties is a REIT that owns a portfolio of casino properties, specifically those operated by MGM Resorts (NYSE: MGM). It owns Las Vegas properties including MGM Grand, Mandalay Bay, and Mirage, as well as non-Vegas properties such as the Borgata in Atlantic City and MGM National Harbor near Washington D.C. And MGM Resorts is the majority shareholder, with just over 50% of the company.

While the company's current portfolio of a dozen premier gaming properties is certainly impressive, MGM Growth Properties has big growth ambitions. The company plans to grow its gaming portfolio significantly in the coming years, and not just with MGM-operated properties. It even intends to branch out to nongaming real estate in the hospitality sector.

And despite only having a single major tenant right now, MGM Growth Properties' 5.8% dividend yield is quite stable -- I don't know of any other hospitality REITs that can claim a 100% rent collection rate during the COVID-19 pandemic.

The Millionacres bottom line

These three REITs provide an excellent combination of high dividends and great long-term growth potential but aren't risk-free investments, especially over shorter time periods. They're appropriate as part of a diversified portfolio for investors who plan to leave their money invested for at least five years. Longer is even better.

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Matthew Frankel, CFP owns shares of Iron Mountain. The Motley Fool owns shares of and recommends Physicians Realty Trust. The Motley Fool recommends MGM Growth Properties (Class A). The Motley Fool has a disclosure policy.