UHT - Forget Annaly Capital: 3 REIT Stocks to Buy Instead
2024-01-12 17:25:00 ET
The big attraction that investors have to Annaly Capital (NYSE: NLY) is its huge 13.2% dividend yield. That's an impressive number, but the dividend backing it has been cut multiple times over the past decade. If you buy Annaly thinking that you can live off the income, you might end up suffering a "pay cut" if history is any guide. It would be better to take a lower yield from a more reliable real estate investment trust (REIT), such as Federal Realty (NYSE: FRT) , Universal Health Realty Trust (NYSE: UHT) , or NNN REIT (NYSE: NNN) . Here's a quick look at each.
While Annaly stands out for its lofty yield, Federal Realty stands out for its impressive dividend streak. It is a Dividend King with more than five decades' worth of annual dividend increases behind it, the longest such streak in the REIT sector. However, Federal Realty is unique in other ways as well. Although its focus on strip malls and mixed-use projects isn't unusual, it only owns around 100 properties. Most of its closest peers own far more (many own multiples of that figure). Federal Realty basically focuses on quality over quantity.
This is not a small issue, noting that Federal Realty operates in more densely populated areas than its peers, and those areas have more wealthy residents. Moreover, with a small portfolio, the retail-focused REIT tends to pay extra attention to redevelopment efforts at its properties, ensuring they are at the top end of the options where they compete. At the end of the day, Federal Realty properties are the type the retailers want to be in, and consumers want to shop at. The only problem is that the shares are usually afforded a premium valuation. Still, the current 4.2% dividend yield is near levels seen during the COVID-19 pandemic and the Great Recession. It might be worth a look for investors who prize dividend consistency.
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Forget Annaly Capital: 3 REIT Stocks to Buy Instead