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The 5 Best REITs to Buy for Dividend Income

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REITs (real estate investment trusts) are currently undervalued and make great candidates for your long-term retirement portfolio. While tech stocks have been soaring, I always like adding stable dividend-paying REIT stocks to my IRA.

1. Reality Income (O)

Realty Income is one of the biggest REIT dividend stocks to own. The company rents its properties to companies like Walgreens and 7-Eleven using a safe triple net-lease agreement with high repayment rates.

Realty Income is well known as the monthly dividend company with decades of rising dividend payments. When you reach retirement, receiving steady monthly income is important and that’s why Realty Income is a staple in my retirement portfolio.

Increased dividends means more money in your pockets even when you aren’t actively acquiring shares.

Realty Income is a member of the prestigious S&P 500 and S&P High Yield Dividend Aristocrats Index. Here are some impressive highlights from Realty Income showing their consistent, long term performance:

  • 16.8% Annual Compounded Return Since 1994
  • 593 Consectitive monthly dividends paid
  • 89 consecutive dividend increases

As you can clearly see, Realty Income is a top dividend REIT stock for investors who desire monthly passive income along with long-term capital appreciation.

I own shares of Realty Income for my IRA portfolio and it’s one of the few stocks I plan to hold for a lifetime. Realty Income is a net least company meaning their tenants pay a monthly lease to operate their businesses. The company collects income from tenants and pays the majority of the income to shareholders via dividends.

AFFO, known as adjusted funds from operations, is the most important metric for REIT stocks because Realty Income uses this income to continue paying their dividend. Realty Income has consistently increased AFFO over the years, allowing them to increase their quarterly dividends as well.

See the chart below for a visualization of this:

Shares are currently trading at a P/E ratio of 58, the stock is trading near an all-time high but I’m building a long-term position in the company. I will continue to buy shares over the long run as I attempt to capture a higher yield on cost well into the future.

2. Simon Property Group (SPG)

3. Public Storage (PSA)

4. American Tower (AMT)

5. Digital Realty (DLR)