Real estate is the oldest asset class in the book — it’s timeless.
But most individual investors lack the connections, knowledge, and financial resources to invest in commercial properties. That’s where real estate investment trusts (REITs) come in. These publicly traded companies acquire and lease real estate. They distribute at least 90% of their taxable income to shareholders as nonqualified dividends.
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It makes REITs fantastic choices for dividend investors. Here are three world-class REITs covering three different types of real estate. Their strong financials, resilient dividend history, and attractive valuations make them the best REITs to invest $1,000 in today.
Many dividend investors know Realty Income (NYSE: O) as the “monthly dividend company” because it pays out monthly dividends rather than the quarterly schedule most companies follow. Realty Income owns and manages a portfolio of over 15,000 properties across the United States and Europe, specializing in net leases on single-tenant retail properties, including restaurants, stores, gyms, pharmacies, and other retail establishments.
High interest rates in recent years have bogged down Realty Income’s stock, driving its dividend yield to about 5.5%, near decade highs. Don’t worry, though; the dividend payout ratio is only 76% of Realty Income’s 2024 funds from operations (FFO), and the company has paid and raised its dividend for 32 consecutive years.
The business has grown at a mid-single-digit pace over the long term. If that continues, Realty Income could be a sneakily productive long-term holding for those willing to reinvest the dividends over time. The stock trades at 14 times its FFO, a nice value for one of the market’s most dependable REITs.
California has a massive economy and industrial base. If it were a country, California would have the world’s 11th-largest economy. Rexford Industrial Realty (NYSE: REXR) owns and manages a portfolio of over 400 industrial properties concentrated in Southern California. Its properties house manufacturing, warehousing, distribution, and research and development for tenants across dozens of industries.
Rexford Industrial Realty’s dividend yield has reached 5.3%, its highest on record. Abnormally high yields can be a red flag, but this appears more like an opportunity, as Rexford Industrial Realty’s FFO comfortably covers the dividend at a 73% payout ratio. The company has managed to raise its dividend every year since its initial public offering in 2014, including during the COVID-19 pandemic.
The company has grown its FFO by 16% annually over the last five years. It’s hard not to like Rexford here, trading at just over 14 times its FFO. Investors get a great mix of growth and dividend yield. Additionally, developable land is scarce in Southern California, so Rexford Industrial Realty is likely to continue enjoying pricing power as one of the region’s most prominent real estate players.
E-commerce is one of the most significant growth trends in the economy. Prologis (NYSE: PLD) is capitalizing on it. The company develops, leases, and, in some cases, operates properties for supply chain and logistics purposes worldwide. Prologis’ top tenants include Amazon, Home Depot, FedEx, and United Parcel Service (UPS), among others. Its properties often sit in key strategic locations near major transportation hubs. Management estimates that nearly 3% of global GDP (the economic value of goods and services) passes through its properties.
Prologis is another REIT with a high initial dividend yield, coupled with strong growth. The stock yields 4%, while Prologis has grown its FFO by 12% annually over the past five years. Management has raised the dividend for 11 consecutive years, with an average annual increase of 13% over the past five years. Its payout ratio remains modest at 72% of 2024 FFO, and the company has an “A” credit rating from S&P Global, a high mark for a REIT. These are rock-solid financials investors can trust.
Meanwhile, the company should continue to grow at a solid pace. New construction for supply chain properties has dropped amid higher interest rates. Therefore, Prologis should continue to enjoy strong demand for its properties amid continued growth in e-commerce, which still accounts for only 16% of total retail spending in the United States. The stock isn’t a bargain at over 18 times FFO, but it’s a reasonable valuation for a REIT with such durable growth prospects.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, FedEx, Home Depot, Prologis, Realty Income, and S&P Global. The Motley Fool recommends United Parcel Service and recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.
The Best REIT Stocks to Invest $1,000 in Right Now was originally published by The Motley Fool
