Real estate investment trusts (REITs) are fantastic dividend payers. Due to their unique structure, these real estate focused stocks are required to pay 90% or more of their taxable income in the form of dividends to gain access to certain tax advantages, making them great passive income stocks for long-term investors.

VICI Dividend Yield Chart

VICI Dividend Yield. Data source: YCharts

Take VICI Properties (VICI -0.26%), Kilroy Realty (KRC -0.12%), and Spirit Realty Capital (SRC), for example. A $3,000 investment split between these three stocks evenly would net you about $172 in passive income a year, the equivalent of a 5.7% yield. Here's a closer look at each company and why three Motley Fool contributors believe they are great buys in 2023.

VICI Properties is a winning investment

Liz Brumer-Smith (VICI Properties): VICI Properties is a net lease REIT that specializes in owning and leasing casinos and resorts in the U.S. and Canada. This young REIT got its start in 2017 and now owns 50 gaming properties that are leased to some of the biggest names in the industry like MGM Resorts International, Hard Rock, Caesars Entertainment, and Harrah's.

The casino industry is highly susceptible to the swings of the economy, but VICI Properties has done a fantastic job of diversifying and recession-proofing its income through its properties. To start, its leases are super long term in nature. Its top 10 tenants have an average lease tenure of 42 years. Its leases also have incremental increases built into them based on the consumer price index, which helps offset rising cost due to inflation and consistently grow its revenue. On top of that, as a net-lease REIT, its tenants pick up most of the costs of operating the properties. 

VICI's properties aren't just hotels and casinos. It also has convention venues, restaurants, retail shops, golf courses, and other entertainment venues. The company has indicated it plans to increase its ownership in non-gambling experiential properties to further diversify its portfolio.

What really sweetens the deal with this high-yielding dividend stock is its recent performance. VICI Properties was the top-performing REIT in 2022, providing a 13% return while most REITs fell by 10% to 25% or more. Its fourth-quarter and full-year 2022 earnings were off the charts with its revenue growing by 72% from the year earlier. Add in its top-notch balance sheet and 3.4% yield and it's easy to see why this stock is a winning investment for income investors.

Kilroy Realty offers great dividend yields from green properties

Kristi Waterworth (Kilroy Realty): If you're investing your money hoping for some sweet dividend action, Kilroy Realty, with its 6% dividend yield, is definitely worth considering. Normally, I'd be very hesitant to recommend an office REIT in the current environment, but Kilroy has shown it has what it takes to weather the current "will-they-or-won't-they-return" question that's been toppling property owners in the office space sector.

The shares are down more than 50% from their March 2022 high, potentially making the stock one of the best long-term investments you'll make during this down period in the market. Office space in general has taken a beating due to a fear that no one will ever return to their offices in a serious way. But at least there's the possibility of recovery with Kastle's Back to Work Barometer registering all-time highs for the past two weeks, with occupancy readings higher than 50% both weeks.  

As for Kilroy, this company has done incredibly well given the environment it's in. It operates office and mixed-use real estate in San Diego, Los Angeles, San Francisco, Seattle, and Austin, Texas. Currently, it owns a total of 120 office properties with more than 16 million rentable square feet, as well as 1,001 residential units. The office properties are 92.6% leased, even if actual occupancy on almost all days is much lower.  

Kilroy's annual dividend has been growing since 2017 when it was just $1.65. In 2022, the yearly dividend was $2.12, up more than 28% in just five years. The company raised dividend again in the third quarter of 2022, to $0.54 per quarter, which would put 2023 at $2.16.

The company's earnings rose in 2022 versus 2021, with rental income up 11.9%, total income up 14.9%, and net operating income up 13.4%. This is, in part, due to occupancy rates increasing from 91.6% in 2021 to 92.9% in 2022, but general rental rate increases also have played a significant role.

Although 15 tenants make up almost half of Kilroy's rental revenue, they're powerful brands that are hard to imagine falling so hard that they affect the company's bottom line. Tenants such as Stripe, Amazon, Microsoft's LinkedIn, Adobe, Salesforce, DoorDash, Okta, and Netflix call Kilroy's properties home.

Along with being a dependable office REIT, Kilroy is highly invested in its green initiatives, which include the on-site generation of over six megawatts of electricity each year (equivalent to powering about 1,200 homes each year). Investing in Kilroy really does a couple of things for you: It gives you a great dividend, and it makes you feel good because you're helping the world get a little bit better with every share you pick up.

Spirit Realty can add some zest to your passive income plays

Marc Rapport (Spirit Realty): Spirit Realty doesn't get the attention that a lot of its competitors do among the 225 or so publicly traded REITs, but now might be a good time to take a look.

Spirit has grown rapidly since its 2012 initial public offering (IPO). Then it had about 1,100 properties worth about $3.6 billion and occupied by 165 tenants. Now the Dallas-based operation has a portfolio of 2,115 properties occupied by 351 tenants in 34 industries. And that portfolio, which represents an investment of $9.2 billion, is 99.9% occupied, the company says.

This diversified REIT pays a dividend that yields about 6.3% at a share price of $41, which is down about 10% in the past year. Spirit has raised its dividend by about 6% in the past 18 months after holding the payout steady through the pandemic despite the stress on its retail-heavy portfolio.



Spirit is diversifying its tenant mix. It now gets about 69% of its income from retail tenants -- led by convenience stores at about 11% of its rent roll -- and another 23% from industrial tenants. That latter category is growing, with nearly 90% of its fourth-quarter 2022 investment of $312 million in a mix of distribution, light manufacturing, and industrial outdoor storage.

This chart shows how well Spirit Realty's performance has held up since its September 2012 IPO by comparing its total return with Realty Income, one of the most popular of net lease REITs, and the benchmark Vanguard Real Estate ETF, which generally holds about 160 REITs.

SRC Total Return Level Chart

SRC Total Return Level data by YCharts

A strong balance sheet and growing portfolio suggest more of the same in the future and commend this trust for consideration in an income-focused portfolio with a nice chance of growth.