Owning real estate is one of humanity's most established and reliable wealth-building tools. You had to be rich back in the day to own investment property, but that's no longer the case.
You can invest in real estate investment trusts (REITs), businesses structured to own and lease real estate, and pay profits to shareholders as dividends. You can buy and hold a diversified portfolio of REITs like those listed below and let them pay back your investment little by little.
1. Innovative Industrial Properties
Cannabis is illegal at the federal level in the United States, making it hard for growers and other cannabis businesses to access much-needed financing. Innovative Industrial Properties (IIPR) helps solve this by acquiring property from cannabis companies and then leasing it back to them. This unlocks the equity in the property that cannabis companies can use to invest in growing their business.
The stock's dividend yield is 3.5% based on the current share price. Cannabis is becoming an increasingly hot industry, so business has been great for Innovative Industrial. In 2021, the company's cash profits (referred to as funds from operations, or FFO) grew 78% over 2020.
Self-storage is always in demand; people experience many life events that necessitate storage, from moving to changing jobs or simply needing a place for their stuff. CubeSmart (CUBE) owns and operates 1,258 such facilities across the United States.
The company's footprint focuses on urban areas, especially East Coast states like New York and New Jersey. It's a consumer-facing brand, operating self-branded locations.
The business has been steady and successful; CubeSmart has grown its FFO per share by 7.3% annually since 2017,making it a reliable dividend stock. The company's dividend yield is currently 3.4%, and the payout has been raised an average of 6.9% annually over the past five years.
3. Farmland Partners
Land isn't a flashy asset, but there is only so much of it, and farmland is becoming increasingly scarce with housing and other developments spreading across North America. Farmland Partners (FPI) owns and leases roughly 186,000 acres of farmland across 19 states to those who grow commercial crops.
The REIT has steadily acquired land, buying roughly 300 properties since its initial public offering (IPO) in 2014. Farmland Partners pays a dividend that yields 1.5% at the current share price. Its non-GAAP FFO grew 91% year over year in 2021, and the company could see long-term tailwinds as it acquires more properties while farmland becomes increasingly scarce over the years.
4. Medical Properties Trust
Healthcare is a pillar of the global economy, and Medical Properties Trust (MPW) is the second-largest non-government owner of hospitals globally. It has more than 400 facilities, with properties in North America, Europe, South America, and Australia. The REIT uses net leases, which put all the costs of occupying a property — like taxes, insurance, and maintenance — on the tenants, making Medical Properties a more-stable business.
Investors can enjoy a sizable 5.6% dividend yield and expect the dividend to grow about $0.04 per share annually, which it's done every year since 2014. The business generated $976 million in FFO in 2021, a 29% increase over 2020. Healthcare should prove to be a resilient industry over the long term, especially as populations continue to age worldwide.
5. Duke Realty
Logistics are an often-forgotten piece of how items ship from point A to point B in this age of e-commerce. Duke Realty (DRE) owns and operates roughly 160 million square feet of space across 19 major markets in the United States. The company focuses on warehouses for e-commerce, an industry that isn't going away anytime soon.
Investors will get a dividend yield of 2% at the current stock price. The company's FFO per share grew to $1.73 in 2021, a nearly 14% increase over 2020. Duke Realty recently started developing nine new projects in 2021, at an expected cost of $466 million. These continued investments should help drive business growth. E-commerce is still just 14% of total retail sales in the United States, so there should be more demand for logistics space in the future.
Originally published on Fool.com
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Justin Pope has no position in any of the stocks mentioned. The Motley Fool owns and recommends Farmland Partners and Innovative Industrial Properties. The Motley Fool has a disclosure policy.