High-Yield Havens: 2 REITs to Snap Up and 1 to Steer Clear Of
As the S&P 500 Index hovers near all-time highs, investors seeking high-yielding stocks must be prepared to take on greater risk. But not all high-yield opportunities are created equal. In the world of mortgage real estate investment trusts (REITs), AGNC Investment’s nearly 14% yield may seem enticing, but its payout history tells a different story.
A Cautionary Tale: AGNC Investment
AGNC Investment’s total return may look impressive at first glance, but scratch beneath the surface and you’ll find a different narrative. The company’s price and dividend have been trending downward for years, with a volatile dividend history to boot. Even if the dividend is increased, the risk of future cuts remains significant. Mortgage REITs are complex investments, best suited for aggressive and active investors. For dividend investors seeking stability, AGNC Investment’s yield may not be worth the risk.
Two REITs on the Rebound
However, not all dividend-cutting REITs should be written off. EPR Properties and W.P. Carey, both landlords, have navigated challenging times and are now poised for growth.
W.P. Carey: A Compelling Opportunity
W.P. Carey’s decision to exit the office sector in 2024 led to a dividend cut, but the REIT has since resumed its quarterly dividend increases. With a record level of liquidity, management plans to acquire more properties, fueling further dividend growth. W.P. Carey’s 5.8% yield appears solid, and its potential for continued growth makes it an attractive option.
EPR Properties: Getting Back on Track
EPR Properties, owner of experiential properties like casinos and movie theaters, cut its dividend during the pandemic. However, with rent coverage now above pre-pandemic levels and a reasonable payout ratio, the REIT is on the mend. Its 7.1% yield is enticing, and with three consecutive dividend increases since the cut, EPR Properties seems to be regaining its footing.
Balancing Risk and Reward
Every investment carries risk, but for income investors, the key is to balance risk and reward. While AGNC Investment’s yield may be tempting, its dividend risk is too great. Conversely, W.P. Carey and EPR Properties offer a more promising outlook, with their dividend risk appearing relatively low. By seizing these opportunities, long-term dividend investors can lock in high yields from REITs that have already begun growing their dividends again.
Leave a Reply