The S&P 500 continues its retreat from record highs, prompting investors to seek solid dividend income in the real estate sector. Morningstar senior equity analyst Kevin Brown suggests that real estate investment trusts (REITs) are a bright spot due to declining interest rates.
When rates have come down, the real estate sector has outperformed versus the S&P 500. However, when rates have gone up, the sector has underperformed. With the current benchmark yield around 4.27%, REITs are more attractive to income investors.
Brown highlights three names that he likes: Realty Income, Federal Realty, and Healthpeak Properties. These REITs offer strong track records of dividend payments and stable earnings growth.
Realty Income, a triple net lease REIT, has a consistent dividend payment record despite the pandemic and financial crisis. The company’s tenants include 7-Eleven and Dollar General.
Federal Realty, which includes TJX Companies’ HomeGoods unit and Starbucks in its portfolio, offers a dividend yield of 4.6% and is liked by Wall Street analysts.
Healthpeak Properties, whose portfolio includes Baylor University Medical Center, offers investors a dividend yield of 6%. The company’s stable earnings growth makes it attractive despite decelerating NOI growth in some sectors.
Investors should note that not all REITs equal, and they’ll need to discern among different areas of the sector. Realty Income, Federal Realty, and Healthpeak Properties are worth considering for their strong dividend payment records and stable earnings growth.
Source: https://www.cnbc.com/2025/03/13/morningstar-likes-these-solid-dividend-payers-when-markets-get-choppy.html