These REITs will provide enough income to beat the ravaging effects of inflation on an income investor’s portfolio
- These REITs (real estate investment trusts) use growth and dividends to provide protection from inflation for investors.
- Medical Properties Trust (MPW): This REIT invests in hospitals globally and pays a quarterly dividend with a 6.2% annual yield.
- Omega Healthcare Investors (OHI): This medical property REIT has an annual 9% dividend yield paid quarterly.
- Mid-America Apartment Communities (MAA): An apartment complex REIT owner with a 2.7% yield and good cash flow.
- Innovative Industrial Properties (IIPR): This cannabis property REIT has good profitability with a 5.3% yield, paid quarterly.
- National Storage Affiliates Trust (NSA): This self-storage REIT has a good track record and a 4.1% yield, paid quarterly.
- Alpine Income Property Trust (PINE): High-quality commercial properties REIT with a 5.7% yield, paid quarterly.
This list of six REITs (real estate investment trusts) should outperform inflation on a total return basis over the next year. That means that the combination of each stock’s price growth and dividend yield will overcome the effects of inflation.
That’s because these are all high-quality REITs that produce enough income to cover their distribution payments. As income prices rise, these companies are able to raise their prices to their customers. That will provide higher income and greater profitability.
Let’s dive in and look at these REITS further:
|MPW||Medical Properties Trust||$18.58|
|OHI||Omega Healthcare Investors||$29.77|
|MAA||Mid-America Apartment Communities||$181|
|IIPR||Innovative Industrial Properties||$133.05|
|NSA||National Storage Affiliates Trust||$52.45|
|PINE||Alpine Income Property Trust||$18.95|
Medical Properties Trust (MPW)
Market Capitalization: $11.15 billion
Dividend Yield: 6.2%
Medical Properties Trust (NYSE:MPW) is a hospital REIT and one of the world’s largest owners of hospitals, with 431 facilities and around 43,000 licensed beds in nine countries. The stock has good earnings prospects and shows a 6.2% dividend yield, paid quarterly, with its $1.16 annual dividend. It has also had nine consecutive years of dividend growth.
One of its chief advantages, which the company highlighted in its first-quarter earnings conference call, is its inflation-protected leases for hospitals that it owns. As a result, the company won’t be hurt as much by higher inflation over the coming year. It can pass on inflation-based increases in rent to its hospital operators.
Analysts forecast $1.83 in funds from operations (FFO) this year and $1.91 next year. This puts the stock, at $18.58 at the close Tuesday, on a forward earnings multiple of 9.7 times.
Omega Healthcare Investors (OHI)
Market Cap: $7 billion
Dividend Yield: 9%
Omega Healthcare Investors (NYSE:OHI) is a REIT that invests in U.S. and U.K. skilled nursing and assisted living facilities, usually with a triple net lease structure.
The REIT is attractive today because its $2.68 annual dividend provides an annual dividend yield of 9%. The company has kept its quarterly dividend stable at 67 cents for the past 2.75 years and will likely keep it at the level at least for three years.
Analysts forecast that its FFO cash flow will cover the $2.68 dividend this year at $2.91 per share. Moreover, it will be well covered next year if analysts’ forecasts of $3.01 FFO per share come true. It could also leave room for the dividend to rise as well.
Nevertheless, the stock is cheap since the dividend takes up over 91% of its earnings power. OHI leases its nursing properties with good long-term secular growth as the U.S. and U.K. population ages. Therefore, its earnings should be stable. That makes the dividend secure as well.
Its yield should provide higher than inflation income for OHI stock investors.
Mid-America Apartment Communities (MAA)
Market Cap: $21.8 billion
Dividend Yield: 2.7%
Mid-America Apartment Communities (NYSE:MAA) invests in apartment complexes in the Southeast, Southwest, and Mid-Atlantic areas of the U.S.
It recently raised its quarterly dividend to $1.25 after just two quarters at $1.09 per share. Therefore, its $5 annual dividend rate provides the stock, at $181 as of Tuesday’s close, an annual yield of 2.7%. This is a very stable dividend, as the REIT has paid dividends in the past 27 years, including 12 consecutive years of dividend raises.
Moreover, the REIT earns plenty of cash flow to cover its $5 dividend. Analysts now forecast that its FFO will reach $8.16 this year and $8.88 in 2023. That means that its payout ratio is just 61.3% this year. REITs have to pay out 90% of their taxable net income, so there is the possibility the company may have to raise its dividend further.
One thing for sure is that the huge gains in rents throughout the U.S. make MAA’s assets much more valuable. That will feed into a higher stock price, which will beat inflation for investors.
Innovative Industrial Properties (IIPR)
Market Cap: $3.7 billion
Dividend Yield: 5.3%
Innovative Industrial Properties (NYSE:IIPR) is a REIT that invests in cannabis retail and warehouse properties. It leases to experienced, state-licensed operators for their regulated medical-use cannabis facilities.
This is a growth industry over the long run. Therefore the company expects to benefit from rent increases as cannabis sales slowly rise. Recently the company paid out a $1.75 quarterly dividend, after paying just a $1.50 dividend in the prior quarter.
If the company can sustain it, the $1.75 quarterly dividend works out to an annual rate of $7. So, at $133.05 per share, IIPR stock sports a 5.3% dividend yield. This is more than covered by analysts’ forecasts of $8.42 in FFO this year and $10.04 next year. That should allow investors to outperform inflation, especially with sales and earnings growth in the cannabis industry.
In addition, IIPR trades at a low price-to-FFO multiple of just 13 times next year’s forecast FFO.
National Storage Affiliates Trust (NSA)
Market Cap: $6.8 billion
Dividend Yield: 4.1%
National Storage Affiliates Trust (NYSE:NSA) owns self-storage facilities in about 100 large cities in the U.S. and leases them to self-storage operators. It is able to raise rents on these facilities in line with inflation, which is why investors should be able to rely on this stock.
Right now the REIT pays out an annual dividend of $2.20. So, at yesterday’s closing price of $52.45 its dividend yield is 4.18%. It is more than covered by the company’s FFO forecast of $2.83 this year and $3.02 next year. These estimates more than cover the $2.20 dividend paid out by the NSA REIT.
That makes the dividend fairly secure over the next year, especially since its rent prices can rise with inflation. In the past six years, the company has consistently paid a dividend. In addition, its valuation multiple is low at just 17.4 times next year.
Alpine Income Property Trust (PINE)
Market Cap: $256.9 million
Dividend Yield: 5.7%
Alpine Income Property Trust (NYSE:PINE) operates a portfolio of single-tenant net-leased commercial income properties. It pays a dividend of $1.08 annually, so, at $18.95 on May 31, the stock has a dividend yield of 5.7%, which is much higher than the average stock yield.
Moreover, this high dividend is more than covered by the forecasts of $1.63 per share this year and $1.50 next year. That puts it at over just 12.6 times its FFO cash flow.
This low valuation and its high yield make PINE stock a good bet to outperform inflation for investors in the long term.
This post originally appeared at InvestorPlace.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com, Newsbreak.com and Beehiiv.com.