Updated on May 14th, 2020 by Bob Ciura
Spreadsheet data updated daily
Real estate investment trusts – or REITs, for short – can be fantastic securities for generating meaningful portfolio income. REITs widely offer higher dividend yields than the average stock.
While the S&P 500 Index on average yields less than 2% right now, it is relatively easy to find REITs with dividend yields of 5% or higher.
The following downloadable REIT list contains a comprehensive list of U.S. Real Estate Investment Trusts, along with metrics that matter including:
- Stock price
- Dividend yield
- Market capitalization
- 5-year beta
You can download your free REIT list (along with the above mentioned financial metrics) by clicking on the link below:
In addition to the downloadable Excel sheet of all REITs, this article discusses why income investors should pay particularly close attention to this asset class. And, we also include our top 10-ranked REITs today.
Table Of Contents
In addition to the full downloadable Excel spreadsheet, this article covers our top 10 REITs today, as ranked using expected total returns from The Sure Analysis Research Database.
The list is narrowed down further based on a qualitative assessment of business model strength, growth potential, and an analysis of debt levels. The top 10 list is ranked by 5-year expected total returns, in order of lowest to highest.
The table of contents below allows for easy navigation.
- How To Use The REIT List
- Why Invest In REITs?
- REIT Financial Metrics
- The Top 10 REITs Today
#10: Public Storage (PSA)
#9: W.P. Carey (WPC)
#8: National Retail Properties (NNN)
#7: Realty Income (O)
#6: STAG Industrial (STAG)
#5: Federal Realty Investment Trust (FRT)
#4: Omega Healthcare Investors (OHI)
#3: Ventas REIT (VTR)
#2: Brixmor Property Group (BRX)
#1: Simon Property Group (SPG
How To Use The REIT List To Find Dividend Stock Ideas
REITs give investors the ability to experience the economic benefits associated with real estate ownership without the hassle of being a landlord in the traditional sense.
Because of the monthly rental cashflows generated by REITs, these securities are well-suited to investors that aim to generate income from their investment portfolios. Accordingly, dividend yield will be the primary metric of interest for many REIT investors.
For those unfamiliar with Microsoft Excel, the following images show how to filter for REITs with dividend yields between 5% and 7% using the ‘filter’ function of Excel.
Step 1: Download the Complete REIT Excel Spreadsheet List at the link above.
Step 2: Click on the filter icon at the top of the ‘Dividend Yield’ column in the Complete REIT Excel Spreadsheet List.
Step 3: Use the filter functions ‘Greater Than or Equal To’ and ‘Less Than or Equal To’ along with the numbers 0.05 ad 0.07 to display REITs with dividend yields between 5% and 7%.
This will help to eliminate any REITs with exceptionally high (and perhaps unsustainable) dividend yields.
Also, click on ‘Descending’ at the top of the filter window to list the REITs with the highest dividend yields at the top of the spreadsheet.
Now that you have the tools to identify high-quality REITs, the next section will show some of the benefits of owning this asset class in a diversified investment portfolio.
Why Invest in REITs?
REITs are, by design, a fantastic asset class for investors looking to generate income. Thus, one of the primary benefits of investing in these securities is their high dividend yields.
The currently high dividend yields of REITs is not an isolated occurrence. In fact, this asset class has traded at a higher dividend yield than the S&P 500 for decades.
This trend is shown below.
The high dividend yields of REITs are due to the regulatory implications of doing business as a real estate investment trust. In exchange for listing as a REIT, these trusts must pay out at least 90% of their net income as dividend payments to their unitholders (REITs trade as units, not shares).
Sometimes you will see a payout ratio of less than 90% for a REIT, and that is likely because they are using funds from operations, not net income, in the denominator for REIT payout ratios (more on that later).
One might think that the high payout ratios of REITs would result in inferior total return performance compared to their peers (even though they have high dividend yields).
This is not the case. According to MSCI, which compiles and tracks the index, the MSCI US REIT Index generated total annual returns of 10.6% per year since December 30, 1994. It outperformed the MSCI USA Investable Market Index (IMI), its parent index that tracks the large, mid and small cap segments of the USA market, by approximately 60 basis points per year in the same period.
REIT Financial Metrics
REITs run unique business models. More than the vast majority of other business types, they are primarily involved in the ownership of long-lived assets. From an accounting perspective, this means that REITs incur significant non-cash depreciation and amortization expenses.
How does this affect the bottom line of REITs?
Depreciation and amortization expenses reduce a company’s net income, which means that sometimes a REIT’s dividend will be higher than its net income, even though its dividends are safe based on its cash flow.
To give a better sense of financial performance and dividend safety, REITs eventually developed the financial metric funds from operations, or FFO. Just like earnings, FFO can be reported on a per-unit basis, giving FFO/unit – the rough equivalent of earnings-per-share for a REIT.
FFO is determined by taking net income and adding back various non-cash charges that are seen to artificially impair a REIT’s perceived ability to pay its dividend.
For an example of how FFO is calculated, consider the following net income-FFO reconciliation from a recent earnings release of Realty Income (O), one of the largest and most popular REIT securities.
Source: Realty Income Earnings Release
In the 2019 fourth quarter, net income per unit was $0.39 per share while FFO per unit was $0.85, a sizable difference between the two metrics. This shows the profound effect that depreciation and amortization can have on the GAAP financial performance of real estate investment trusts.
The Top 10 REITs Today
Below we have ranked our top 10 REITs today based on qualitative strength and total return potential, in order from lowest to highest 5-year expected total returns. These stocks have high expected rates of return over the next five years, and high dividend yields which make them appealing for income investors.
Top REIT #10: Public Storage (PSA)
- 5-Year Expected Annual Return: 11.4%
Public Storage is a REIT that was formed in 1980. The trust owns an interest in about 2,400 properties that lease storage space, typically on a month-to-month basis, making it the largest such entity in the United States. The trust produces about $2.8 billion in annual revenue and has a market capitalization of $29.9 billion.
Public Storage had a surprisingly strong beginning to the year. In the 2020 first quarter, FFO-per-share rose 3.6% to $2.61. Revenue increased 3.9% year-over-year. The company saw lower move-in activity in recent months, but move-out activity has declined as well. Same-store square foot occupancy of 92.7% expanded from 92.1% at the same time last year.
Public Storage has an impressive track record of growth. FFO-per-share has roughly doubled since 2008, for a compound annual growth rate in the mid-single-digits. We believe growth will slow somewhat from these levels due to fundamental over-crowding in the storage space industry. We expect 3% annual FFO-per-share growth for the next five years.
We also expect the company to hold up relatively well in comparison to many other REITs if a recession occurs in the near future. Public Storage should perform well during the next recession – as it did during the last one – given the defensive nature of the business. It also has the obvious competitive advantage of scale and name brand recognition given that it is the largest storage operator in the United States.
Public Storage trades for a P/FFO ratio of 16.5. Our fair value estimate is a P/FFO ratio of 20, which is slightly below its 10-year average. Therefore an expanding valuation multiple could boost annual returns by 3.9% per year through 2025. In addition, 3% expected FFO-per-share growth and the 4.5% dividend yield result in total expected returns of 11.4% per year over the next five years.
Top REIT #9: W.P. Carey (WPC)
- 5-Year Expected Annual Return: 14.0%
W.P. Carey is a commercial real estate focused REIT that operates two segments: real estate ownership and investment management. The REIT operates more than 1,200 single tenant properties on a net lease basis, across the US and Northern and Western Europe. Its asset management business has AUM of approximately $2.8 billion.
W.P. Carey has a highly diversified real estate property portfolio across multiple various industry groups.
Source: Investor Presentation
W. P. Carey reported its first quarter earnings results on May 1. The trust reported that its revenues totaled $309 million during the quarter, up 3.6% from the same quarter last year. FFO-per-share came to $1.25 on a per-share basis, which was $0.11, or 10% more than the analyst consensus. FFO-per-share increased 3% year-over-year.
Like many other REITs, W. P. Carey withdrew its guidance for 2020, citing the coronavirus crisis and the unknown impact it will have on its operations. So far, W.P. Carey is weathering the storm very well, as it not only generated FFO-per-share growth in the first quarter, but it also has collected more than 95% of its April rents at the time of the earnings release. Plus, W.P. Carey had a high occupancy rate of 98.8% in the first quarter.
W. P. Carey generated FFO-per-share growth at a rate of 6% annually between 2009 and 2019, which was a very solid growth rate for a real estate investment trust. The growth rate has slowed down over the years, as W. P. Carey’s FFO-per-share growth rate has averaged just 3% between 2014 and 2018. Still, this is a decent growth rate, and we expect a similar growth rate of 3%-4% annually going forward.
Growth is fueled by investments in new properties. Since 2012, the REIT invested more than $10 billion into new assets by either purchasing entire REITs or through single-asset/portfolio purchases. Plus, due to the defensive nature of its business and a strong performance during past recessions, we believe that W.P. Carey will fare well during the coronavirus crisis.
One of W.P. Carey’s strengths is its balance sheet which is in better shape than many other REITs. W.P. Carey has a solid credit rating of BBB from Standard & Poor’s. It has a fairly low level of maturities ($768 million) through 2022. It also has a good history of stable dividend growth, having increased its dividend every year since 1998.
The stock trades for a P/FFO ratio of 10.8, below our fair value estimate of 12.5, meaning an expanding valuation multiple could boost annual returns by 3% per year. In addition, expected FFO-per-share growth of 3.5% plus the 7.5% dividend yield lead to total expected returns of 14% per year through 2025.
Top REIT #8: National Retail Properties (NNN)
- 5-Year Expected Annual Return: 16.0%
National Retail Properties is a REIT that owns ~3,000 single-tenant, net-leased retail properties across the United States. It is focused on retail customers because they are much more likely to accept rent hikes in order to avoid switching locations and losing their customer base.
Thanks to this strategy, National Retail has offered consistent growth with markedly low volatility. It is also characterized by very high occupancy rates; its 15-year low occupancy rate is 96%. In fact, from 2003 to 2019 its occupancy never fell below 96.4%.
Source: Investor Presentation
National Retail has increased its dividend for 30 consecutive years (a record matched by only three publicly traded REITs), making it a member of the Dividend Champions.
In the 2020 first quarter, revenue increased 6.9% year-over-year, while adjusted FFO-per-share 4.4% to $0.71. The company reported an occupancy rate of 98.8% as of March 31st. Still, investors should note the elevated level of risk for National Retail Properties due to coronavirus.
As of April 29th, the company collected approximately 52% of April 2020 rent, representing approximately 37% of annualized base rent. The company is negotiating with tenants that have requested rent deferrals, but investors should note that April rent collection is below that of several other REITs.
Therefore, National Retail Properties carries somewhat higher risk than Realty Income, but it could generate higher returns due to its compressed valuation and high dividend yield.
National Retail Properties has an impressive track record of steady growth. It has grown its FFO per share by 5.8% per year on average since 2009. We believe that growth will slow moving forward as investment spreads compress, but a high level of occupancy could still provide it with low single-digit revenue and FFO-per-share growth.
The bulk of National Retail’s FFO-per-share growth will come from net new property acquisitions, which it is well-positioned to execute upon with its recent capital raises. We expect some headwinds this year from the coronavirus outbreak, but assume that the company will bounce back fairly well in the years to come.
The company has a health balance sheet, with less than $327 million of debt maturing through 2022. It has a strong credit rating of BBB+ from Standard & Poor’s, and a modest debt-to-EBITDA ratio of 4.9x. Therefore, while National Retail Properties faces elevated risk from the coronavirus crisis and retail closures across the U.S., it is well-positioned to emerge once the crisis ends.
National Retail Properties stock trades for a P/FFO ratio of 11.1, compared with our fair value estimate of 14. The combination of an expanding P/FFO multiple (positive returns of 4.8% per year), 3.7% expected annual FFO-per-share growth, and the 7.5% dividend yield lead to total expected returns of 16.0% per year through 2025.
Top REIT #7: Realty Income (O)
- 5-Year Expected Annual Return: 16.6%
Realty Income is a retail-focused REIT that owns more than 6,500 properties. Realty Income owns retail properties that are not part of a wider retail development (such as a mall), but instead are standalone properties. This means that the properties are viable for many different tenants, including government services, healthcare services, and entertainment.
Realty Income leaps to the top spot on the list, because of its highly impressive dividend history, which is unmatched among the other monthly dividend stocks. Realty Income has declared 599 consecutive monthly dividend payments without interruption, and has increased its dividend 106 times since its initial public offering in 1994.
Realty Income is a member of the Dividend Aristocrats.
Source: Investor Infographic
Previously, Realty Income stock did not make our list of top monthly dividend stocks due to its persistently high valuation. But in times of crisis, when so many companies are cutting or suspending their dividends, Realty Income’s relative safety becomes even more important. And, as Realty Income stock has declined 33% year-to-date, this has had the effect of lowering its valuation multiple to an attractive level, and also pushing up the dividend yield to 5.7%.
Realty Income is not immune from the coronavirus crisis, as many retail outlets have been closed in recent weeks. However, Realty Income continues to show why it is a best-in-class retail REIT. In the 2020 first quarter, adjusted FFO-per-share increased 7.3% to $0.88, as total revenue increased 17% year-over-year. Realty Income collected 83% of expected contractual rent in April.
The company will see a negative impact from coronavirus in 2020, but it has taken aggressive action to shore up its financial position to weather the storm. Realty Income raised $754 million in the first quarter through the sale of stock. As of May 1st, Realty Income had approximately $1.2 billion of cash on hand and $1.1 billion available on its $3.0 billion revolving credit facility. Therefore, we expect the company to make it through the coronavirus with its dividend intact.
We currently expect Realty Income to generate adjusted FFO-per-share of $3.53 for 2020. Although this forecast may change given the recent closure of many retail locations across the country, the stock trades for a P/FFO ratio of 13.5 based on this. Our fair value estimate is a P/FFO ratio of 18, which means valuation multiple expansion could boost annual returns by 5.9% per year through 2025.
In addition, expected FFO-per-share growth of 5.0% and the current dividend yield of 5.7% lead to total expected returns of 16.6% per year over the next five years.
Top REIT #6: STAG Industrial, Inc. (STAG)
- 5-Year Expected Annual Return: 16.8%
STAG Industrial is the only pure-play industrial REIT active across the entire domestic industrial real estate market. It is focused on single-tenant industrial properties and has ~450 buildings across 38 states in the United States.
As per the latest data, 55% of the tenants are publicly rated and 33% of the tenants are rated “investment grade.” The company typically does business with established tenants to reduce risk. It also pursues broad geographic and tenant diversification to further reduce risk.
The company recently reported solid first-quarter financial results. Core Funds From Operation, or FFO, increased 33% to $70.6 million compared with the same quarter the previous year. Acquisitions fueled the company’s high growth rate, although equity issuances to finance these acquisitions resulted in much lower per-share growth. FFO-per-share increased a more modest 4.4%, although growth is still impressive in the current environment.
A major tailwind for the business has been the rise of ecommerce as 43% of the portfolio handles ecommerce activity.
Source: Investor Presentation
The coronavirus has hurt shipping and by extension the industrial REIT sector. Furthermore, the industrial sector is typically fairly cyclical and therefore suffers during recessions.
However, STAG possess strong regionally based asset management teams with capital projects groups that enable them to engage in value add opportunities to continue growing the portfolio and its cash flow regardless of market conditions. Furthermore, it only owns ~0.5% of the assets in its target universe, giving it an enormous growth runway.
The company recently notified investors that tenants that have requested rent relief equal just ~1% of annual base rent, a promising figure that indicates STAG is holding up relatively well during the coronavirus crisis. The company has also paused acquisitions to preserve cash in this uncertain environment.
So far, STAG’s key financial metrics are holding up well. Occupancy stood at 96.2% in the first quarter, and the company received 90% of April base rental billings.
Finally, its valuation is quite attractive, as the stock trades for a 2020 price-to-FFO ratio of 12. This could generate a positive return of 4.6% annualized from expansion of the P/FFO valuation multiple to our fair value estimate of 15. Along with the 6.2% dividend yield and expected FFO-per-share growth of 6% per year, total returns could reach 16.8% annually through 2025.
Top REIT #5: Federal Realty Investment Trust (FRT)
- 5-Year Expected Annual Return: 19.1%
Federal Realty is a shopping center REIT similar to Brixmor Property Group. However, it concentrates in high-income, densely-populated coastal markets in the US, allowing it to charge more per square foot than its competition. Federal Realty generates $950 million in annual revenue.
Its biggest claims to fame are its A-rated balance sheet (making it one of the most conservative investments in the REIT sector) and 52 straight years of growing its dividend (the longest streak among REITs) at a highly impressive CAGR of 7%.
Federal Realty is on the exclusive list of Dividend Kings.
Source: Investor Presentation
The company reported first-quarter financial results on May 7th. Revenue of $232 million declined fractionally, while adjusted FFO-per-share of $1.50 declined 3.9% from the same quarter last year. The company collected 53% of April rent, and reported that about 47% of its commercial tenants are open and operating based on annualized base rent. In response, the company is boosting its liquidity to help it get through the coronavirus crisis. Federal Realty drew $990 million of its $1 billion revolving credit facility in March. Occupancy now stands at 93.6%.
Federal Realty believes that its portfolio of flexible retail-based properties located in strategically selected major markets that are transit-oriented, first ring suburban locations will continue to thrive for the foreseeable future. This is because these markets’ superior income and population characteristics, significant barriers to entry, and strong demand characteristics will drive strong long-term rent growth.
Furthermore, by keeping the portfolio at a manageable size and restrained to a limited number of core markets, management can give each asset the necessary focus to drive outperformance.
In response to the coronavirus-related shutdowns, the company is boosting its liquidity to help it get through the coronavirus crisis. Federal Realty drew $990 million of its $1 billion revolving credit facility in March.
Federal Realty trades for a 2020 P/FFO multiple of 10.5, below our fair value estimate of 15. Federal Realty stock also has a 6.2% dividend yield. In addition to a ~7.4% annualized boost from an expanding P/FFO multiple, and 5.5% expected annual FFO growth, we expect 19.1% annualized returns over the next five years.
Top REIT #4: Omega Healthcare Investors (OHI)
- 5-Year Expected Annual Return: 19.6%
Omega Healthcare Investors is one of the premier skilled nursing focused healthcare REITs. It also generates about 20% of its $930 million annual revenue from senior housing developments. The company’s three main selling points are its financial, portfolio, and management strength. Specifically, Omega is the leader in Skilled Nursing Facilities.
Source: Investor Presentation
Omega reported first-quarter financial results on May 4th. Revenue increased 13% year-over-year to $253 million in the first quarter, as Omega continued to grow its portfolio. Funds from operation, or FFO, was $181 million, an increase of 26% year-over-year. On a per-share basis, adjusted FFO grew 4% to $0.79.
The trust’s management team said its tenants are facing a “challenging” period of lower revenues and rising expenses thanks to COVID-19, and we’ve reduced our FFO-per-share estimate for this year to $2.90 as a result. We see Omega as somewhat insulated from the crisis and thus, its FFO should hold up fairly well, even under a protracted slowdown from the virus. Omega collected 98% of its rents and mortgage payments due in April.
The portfolio benefits from a favorable near-term supply and demand outlook. It also has no material upcoming lease expirations or lease renewal risk and enjoys strong geographic and operator diversification (71 operators across 40 states plus the United Kingdom). Omega also has an investment-grade credit rating of BBB-.
While uncertainties over the future of the healthcare system in the United States remain and some of its tenants are not financially strong, the company’s exposure to a growing segment of healthcare combined with a high dividend yield, make the stock a recession-resistant buy.
Omega stock trades for a price-to-FFO ratio of 8.6, compared with our fair value estimate of 12. Multiple expansion could add 6.9% to annual returns, as will the 10.7% dividend yield and expected FFO-per-share growth of 2%. Total returns are expected to reach nearly 20% per year through 2025.
Top REIT #3: Ventas REIT (VTR)
- 5-Year Expected Annual Return: 29.5%
Ventas is one of the largest healthcare REITs in the U.S., with approximately 1,200 properties in the U.S., Canada and the United Kingdom. Ventas benefits from a broadly diversified portfolio within the healthcare real estate space. It operates three business segments: Triple-Net, Senior Housing, and Office.
Ventas reported its 2020 first-quarter earnings results on May 8th. Senior Housing continued to be a source of pain for the REIT, with same-store cash NOI declining 10.4% year-over-year, more than offsetting 5.8% growth in Office and 3.9% in Triple-Net properties. As a result, total company same-store cash NOI fell 0.6% year-over-year. Normalized FFO-per-share fell 2% to $0.97.
Still, investors should consider Ventas to be a high-risk, high-reward stock. It is seeing worsening trends due to coronavirus. As of May 1st, spot occupancy was estimated at 80.7%, a substantial decline of 330 basis points since the beginning of April.
Source: Investor Presentation
Management believes it has sufficient liquidity to make it through the crisis relatively unscathed, pointing to the company’s meaningful actions to improve its finances.
Ventas’s net-debt-to-adjusted pro-forma EBITDA ratio improved to 5.7x as of March 31st from 6.1x at the end of 2019. Currently, Ventas has $3.2 billion in cash on hand, as well as a fixed charge coverage ratio of 4.3x. The company has debt maturities of approximately $600 million through 2021, and $1.2 billion of maturities in 2022.
Ventas stock trades for a P/FFO ratio of 7.5. We believe fair value is closer to 14.4, which represents the 10-year average valuation for Ventas. If shares return to this valuation level, it could produce 13.9% annual returns from a rising P/FFO multiple. In addition, annual FFO-per-share growth of 4% and the 11.6% dividend yield result in total expected returns of 29.5% per year through 2025.
The main risk remains the ongoing stagnant and even declining performance in the senior housing portfolio. If the deterioration in this segment continues, it could force management to cut or suspend the dividend, particularly with the coronavirus as an added challenge.
Top REIT #2: Brixmor Property Group (BRX)
- 5-Year Expected Annual Return: 32.9%
Brixmor owns about 421 shopping centers which equate to roughly 73 million leasable square feet and are positioned in the top 50 metropolitan areas in the United States. The REIT’s three largest tenants (by annualized base rent) are TJX Companies Inc. (TJX), The Kroger Co. (KR), and The Dollar Tree Stores, Inc. (DLTR) with no tenant contributing more than 3.4% of annualized base rent, giving it a quality and well-diversified tenant mix.
Brixmor has been able to provide a steadily growing dividend per share that is currently annualized at $1.14. Management also points to a strong investment pipeline which is focused on investing in communities where it sees future growth and divesting in stagnant areas.
Source: Investor Presentation
The company’s main catalyst is its new management team which is investing heavily (over $1 billion organic investment pipeline) in its properties. As a result, it is bridging the previously large gap between its existing rents and market rents.
With considerable room still to run, BRX can grow its cash flow fairly rapidly without having to acquire new properties. There is a risk that cut-throat competition in the grocer space along with the continued advance of ecommerce will lead to continued defaults in BRX’s portfolio, straining its balance sheet and growth in the process.
However, we believe that BRX’s heavy investments in its portfolio along with its aggressive efforts to cull non-core assets will enable it to more than offset any headwinds that may emerge from these trends. Brixmor has also taken steps to shore up its financial position until the coronavirus crisis subsides.
Specifically, the company drew on its revolving credit facility and now has more than $550 million in cash and more than $600M of remaining availability under the credit facility. It withdrew its guidance for 2020 out of an abundance of caution, but the company has no debt maturities until 2022.
The company posted a 4.2% drop in 2020 first-quarter FFO-per-share, a relatively modest decline. The second quarter is likely to be more challenging, as Brixmor reported it had collected 66% of April base rent by May 6th. As of that date, tenants representing approximately 66% of the company’s annualized base rent were open and operating. Therefore, Brixmor could be negatively impacted by the coronavirus crisis if the U.S. economy does not open up relatively soon.
Brixmor stock appears to be a high-risk, high-reward situation. The stock has (understandably) been hit especially hard, but shares could represent a major bargain if the coronavirus crisis abates. The stock trades for a P/FFO ratio of just ~5, compared with our fair value estimate of 11. The combination of 3% expected annual FFO-per-share growth, valuation multiple expansion and the 12.3% dividend yield should fuel satisfactory total returns of nearly 33% per year over the next five years.
Top REIT #1: Simon Property Group (SPG)
- 5-Year Expected Annual Return: 37.8%
Simon Property Group is a real estate investment trust (REIT) that was formed in 1993. The trust focuses on retail properties, mainly in the US, with the goal of being the premier destination for high-end retailers and their customers.
The trust has interests in about 230 different properties that amount to nearly 200 million square feet of leasable space and produce about $5.8 billion in annual revenue. The company has a diversified tenant portfolio.
Source: Investor Presentation
In the 2020 first quarter, FFO-per-share fell 8.6% to $2.78. Portfolio occupancy was 94% at March 31st. The company did not provide information regarding April rent collection. But Simon Property Group has taken a number of actions to help get it through the coronavirus, including but not limited to: salary reductions and other cost cuts, suspending or eliminating more than $1.0 billion of redevelopment and new development projects, and drawing $3.75 billion under its revolving credit facilities. It has since re-opened 89 properties, which will help it recover from the coronavirus crisis.
Simon’s FFO history is quite good in that it saw only a minor dip in profitability during the Great Recession. Funds from operations have since more than doubled. Simon’s focus on high-end retailing has proven an immense source of strength in recent years and we see that steady performance continuing. In total, we see Simon producing a 3% average annual FFO growth rate moving forward.
Despite the broad pressures facing retail real estate, Simon is still among the best retail REITs in the market by many metrics. Its occupancy rates remain extremely high, hovering around 96% in recent quarters. Simon’s competitive advantage is in its world-class portfolio of properties that allows it to charge industry-best leasing rates. Another advantage is its low cost of capital that comes from its A-rated balance sheet, enabling it to invest in ways that competitors cannot afford.
It is not immune to recession as it did cut its dividend during the last downturn. However, despite the cut, its overall business held up fairly well during that period and should be able to again. It is also one of the best-positioned retail REITs to weather the impact of e-commerce on brick-and-mortar retail stores thanks to its exceptional management and A-rated balance sheet. That said, investors should be prepared for the possibility of a dividend cut or suspension if the coronavirus crisis lingers for an extended period.
SPG stock trades for a P/FFO ratio of 5.1, well below our fair value estimate of 10. Valuation expansion could boost annual returns by 14.4% over the next five years. We also expect 7% annual FFO-per-share growth, and the stock has a very high dividend yield of 16.4%. We expect total annual returns of 37.8% per year from Simon Property Group stock through 2025; however, investors should view SPG as a very high risk/high return situation.
The Complete REIT Spreadsheet List contains a list of all publicly-traded Real Estate Investment Trusts.
Bonus: Listen to our interview with Brad Thomas on The Sure Investing Podcast about intelligent REIT investing in the below video.
In fact, one of the best methods to find high-quality dividend stocks is looking for stocks with long histories of steadily rising dividend payments. Companies that have increased their payouts through many market cycles are highly likely to continue doing so for a long time to come.
You can see more high-quality dividend stocks in the following Sure Dividend databases, each based on long streaks of steadily rising dividend payments:
- The 2020 Dividend Kings List: Dividend Stocks With 50+ Years of Rising Dividends
- The 2020 Dividend Aristocrats List: 25+ Years of Rising Dividends
- The 2020 List of All ~260 Dividend Achievers
Alternatively, another great place to look for high-quality business is inside the portfolios of highly successful investors. By analyzing the portfolios of legendary investors running multi-billion dollar investment portfolios, we are able to indirectly benefit from their million-dollar research budgets and personal investing expertise.
To that end, Sure Dividend has created the following stock databases:
- Warren Buffett’s Top 20 Stocks
- Seth Klarman’s Top 5 High Dividend Stocks
- Joel Greenblatt’s Top 20 High Dividend Stocks
- Bill Gates’ Stock Portfolio: Every Holding Analyzed
- Prem Watsa’s Dividend Stock Portfolio: Every Holding Analyzed
You might also be looking to create a highly customized dividend income stream to pay for life’s expenses.
The following two lists provide useful information on high dividend stocks and stocks that pay monthly dividends: