Real estate investment trusts (REITs) can provide passive income and solid returns if timed correctly. Many investors may scratch their heads after a quick 20% drop, but it's not unusual.
This year, Blackstone Inc. BX agreed to purchase roughly $30 billion across four different REITs. As Vanguard Real Estate ETF VNQ has been in a steep decline since January, it appears that Blackstone now sees value in certain real estate investment trusts.
Rising interest rates are typically a negative catalyst for REITs. This is because dividend investors expect a risk premium over what they can get for a short-term treasury yield. As the two-year treasury yield is sitting at 3.75%, income investors should look for dividend yields higher than the risk-free rate.
Here are three REITs offering high yields when compared to short-term treasury yields:
Innovative Industrial Properties Inc IIPR is offering a dividend yield of 7.70% or $7.00 per share annually, making quarterly payments, with a decent track record of increasing its dividends for five years. Innovative Industrial Properties is a real estate investment trust engaged in the acquisition, ownership, and management of specialized industrial properties leased to state-licensed operators for their regulated medical-use cannabis facilities.
As of the second quarter of 2022, Innovative Industrial Properties was operating out of 19 states, with 8,578 rentable square feet, and 88 of those leases coming from the top 15 tenants such as Curaleaf Holdings CURLF, for instance.
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Medical Properties Trust Inc. MPW is offering a dividend yield of 8.31% or $1.16 per share annually, using quarterly payments, with a solid track record of increasing its dividends for eight years.
This healthcare facility REIT owns and leases healthcare facilities primarily in the U.S., Germany and the U.K. It is touted as the first U.S. company to invest in hospitals globally and has grown at a 29% compounded annual growth rate over the past 10 years. Since 2018, Medical Properties' gross assets grew from $10.1 billion to $22.3 billion.
Highwoods Properties Inc. HIW is offering a dividend yield of 6.45% or $2.00 per share annually, utilizing quarterly payments, with a track record of increasing its dividends for five consecutive years. It's engaged in the acquisition, ownership, management, and leasing of properties in urban areas throughout the Southern United States. In terms of total square footage, the vast majority of the company's real estate portfolio consists of office buildings.
Highwoods Properties increased average in-place cash rents by 6.4% per square foot year-over-year, and as of 2021, the company owns 26.9 million square feet.
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