Real estate investment trusts, or REITs, are taxed much less than your typical corporation in exchange for adhering to the 90% Rule—they must pay 90% of their taxable income out to investors as dividends. That’s why REITs offer some of the most attractive dividend yields in the market.
With interest rates coming down, REITs will become more attractive as they’ll generate additional income for investors like you and I.
However, like everything else, not everything is equal. Some REITs are better investments in the long run. Today, I wanted to find the best ones with the highest yields and see if they really stack up against the competition.
How I Came Up With The Following Stocks
This analysis, as usual, starts with Barchart’s Stock Screener. To get this list, I used the following filters:
- Number of Analysts: 4 and above.
- Current Analyst Ratings: 4.5 to 5 (Strong Buy). These two filters combined tell me two things: how much analysts like these REITs and how statistically relevant their scores are. This gives me a better understanding of how the REIT is perceived in the market.
- Annual Dividend Yield: 5% or more. To me, a good dividend yield is about 2% to 5%. Since we’re aiming for high-yielding REITs, I set the minimum value at the upper end of the normal range.
- Watchlist: REITs. Barchart’s Watchlist feature allows me to create lists for whatever category I need, for however many stocks I want. Even better, it’s cross-functional with the Screener tool so that I can use one or two or any combination of my lists for a granular or expansive analysis. Today, though, I’ll stick with my REITs list.
This set of filters yielded six results:
I then arranged the results from highest to lowest yields, and now I’ll talk about the top three, starting with:
Ellington Financial (EFC)
Ellington Financial is the first REIT on this list. The company primarily focuses on mortgage-related, consumer-related, and corporate-related assets and other financial instruments. Its investments include residential and commercial mortgage-backed securities (RMBS and CMBS), residential and commercial mortgage loans, asset-backed securities, consumer loans, and more.
For the past three months, analysts have rated EFC stock a consensus 4.57, making it a strong buy based on seven ratings.
Meanwhile, the company has had a good run in 2024: monthly dividend payments range from 13 to 15 cents, as opposed to last year’s 6 to 15 cents. Currently, Ellington Financial pays 13 cents monthly—that’s $1.56 a year, which translates to an impressive 12.71% yield. As I said, Ellington Financial’s dividend fluctuates, but even at its lowest, assuming a 6-cent monthly or 72-cent annual rate, it still offers a 5.87% yield, which is more than most stocks offer.
Franklin BSP Realty Trust (FBRT)
In 2021, Benefit Street Partners Realty Trust merged with Capstead Mortgage Corporation to form Franklin BSP Realty Trust, now one of the largest publicly traded REITs in the US. Franklin BSP operates by originating, acquiring, and managing a diversified commercial real estate debt portfolio. Its core investment strategy revolves around first mortgage loans generally secured by real estate properties in the United States, as well as investing in subordinate loans, mezzanine loans, and real estate securities.
Since the merger, Franklin BSP has been quite generous to its investors. The company pays 35.5 cents quarterly or $1.42 annually, translating to a 10.94% yield based on the stocks’ current prices. Analysts covering FBRT also love the stock, giving it a solid 5.0 score based on four reviews.
KKR Real Estate Finance Trust (KREF)
Last on the list of high-dividend REITs is KKR Real Estate Finance Trust, which primarily originates senior commercial mortgage loans in the U.S. The company invests in senior loans secured by institutional-quality commercial properties owned by experienced sponsors. These loans are typically located in markets with strong underlying fundamentals, which works well with KKR’s focus on conservative liability and capital preservation.
KKR Real Estate Finance Trust pays $1.00 in dividends annually, translating to an 8.83% yield based on current prices. The company has paid dividends since 2017.
Meanwhile, KREF stock has a 4.67 average score from six analysts with a modest high target price of $14, making it a great choice for long-term dividends.
Final Thoughts on Investing in High-dividend REITs Today
Highly-rated, high-dividend REITs can be ideal if you’re building a dividend-growth portfolio that will eventually support long-term or retirement plans. Choosing which ones to add is entirely up to you, of course, but I find that REITs with high yields, solid portfolios, and safe business strategies make for great long-term investments.
