3 Red-Hot REITs That Just Hiked Their Dividends – Is Now the Time to Buy?

John Smith

The confidence of management is reflected in the dividend raise, which causes a surge in share price. Our research focuses on real estate investment trusts (REITs) that have recently increased payouts to healthcare, storage, and diversified owners.

The steady dividend payments made by real estate investment trusts (REITs) supported by rental revenue from properties provide a reliable source of passive income. The increased interest from investors in real estate investment trusts (REITs) caused by dividend increases typically results in a rise in share price.

Also, when management increases dividends, it means they are confident in continuing or even increasing earnings in the future. Consequently, a dividend increase is a sign that the company is doing well enough to warrant bigger distributions.

We looked into three real estate investment trusts (REITs) this week that announced dividend increases:

  1. CubeSmart – Self Storage
  2. Universal Health Realty Income Trust – Healthcare
  3. Essential Properties Realty Trust – Diversified

To find out if these companies are good buys right now, we look at their dividend history, financial health, and growth potential.

1. CubeSmart Leads Self Storage With Generous 4.87% Yield

More than 600 storage facilities are owned and operated by CubeSmart (NYSE:CUBE) in the US. quick acquisitions have contributed to CubeSmart’s quick expansion since its 2011 rebranding from U-Store-It.

Strong demand is indicated by CubeSmart’s recent occupancy rate of 92.1%. One important measure of real estate investment trust (REIT) profitability, funds from operations (FFO) per share, increased by 242% from 2012 to 2022.

A quarterly dividend increase of 4.1% to $0.51 per share was announced by CubeSmart on December 7th. In the last five years, there have been no reductions or suspensions, and the overall rise is 37.2%.

The dividend yields 4.87% at the present stock price, which is quite generous at $2.04 per year. Nevertheless, there is ample opportunity for future growth, according to a respectable 76.6% FFO payout ratio.

Following a downgrade by a Bank of America analyst who had previously warned of diminishing demand for self-storage, CubeSmart’s stock price dropped from its all-time high in October. But CubeSmart surpassed estimates for both financial results and revenue in their subsequent earnings report.

Since then, the stock price has recovered almost 20%, and the decision to boost dividends shows that management is still optimistic despite the economy’s volatility. Demand for storage facilities actually increased during previous recessions due to individuals downsizing their homes.

Investors seeking passive income can have faith in CubeSmart to maintain dividend payments even in the face of market downturns, thanks to its industry-leading occupancy rates and aggressive growth pace.

2. Universal Health Keeps Raising Dividend After 36 Straight Years

The medical office and hospital properties owned by Universal Health Realty Income Trust (NYSE:UHT) are rented out to major healthcare providers under long-term net leases. Because of this, Universal Health is a passive income asset that you can sleep well knowing will pay dividends.

The fact that Universal Health has paid dividends continuously for 36 consecutive years is astounding. Not to mention that for the last ten years, the REIT has offered little but consistent gains.

The management team continued their winning trend on December 7th by increasing the quarterly dividend to $0.725 (or $2.90) per share. Even though it’s only a 0.7% increase, any increase after maintaining dividends for over 30 years demonstrates incredibly consistent income generation.

But if cash flows drop, Universal Health won’t have much to fall back on thanks to its high 87.8% FFO dividend payout ratio. Additionally, the share price has been falling for the last five years due to the fact that profits have been relatively flat.

The 6.9% dividend yield is enticing, but the company’s ability to grow in the future depends on whether or not its efforts to expand its property portfolio can result in higher rents. Universal Health is a good bet for investors seeking a steady stream of passive income. However, substantial profits are unlikely to be generated by its unappealing foundation.

After nearly four decades of consistent payouts, Universal Health is still a viable option for anyone seeking real estate dividends that are less volatile than stocks.

3. Essential Properties Sports Reasonable 65.5% Payout Ratio

Essential assets Realty Trust (NYSE:EPRT), which was established in 2016, is the owner of over 1,800 service-oriented retail and restaurant assets spread out across the US.

The portfolio maintains its productivity in all economic circumstances thanks to its top tenants, which include fast food franchises, convenience stores, and car washes.

The impressive 99.8 percent occupancy rate at Essential Properties is a reflection of the exceptional quality of their tenants and the popularity of their locations. With the proceeds from the sale of its more established holdings, the corporation is able to invest in new properties, opening up new avenues for expansion.

An increase of 1.8% to $0.285 per share was announced by Essential Properties just this week, on December 7th. The dividend has been increased by 3.7% in the last six months alone, according to management.

In addition, Essential Properties’ cumulative dividend growth over the past five years is an impressive 35.7 percent. The present yield, which starts at $1.14 per year and is going up quickly, is 4.6%.

The most recent increase has not altered the reasonableness of the 65.5% FFO dividend payment ratio, however. This means that Essential Properties can continue increasing its holdings and dividends for a long time without putting undue strain on its financial position.

Shares are expected to see further gains in the future, according to top Wall Street analysts. Their Buy ratings and price targets indicate returns of 20%+.

Essential Properties is well-positioned to maintain its rapid dividend growth rate thanks to its strong financial position, aggressive expansion objectives, and properties that are immune to recession.

A successful company will continue to pay out increasing dividends for investors looking for passive income options for a very long time.

The Takeaway: REIT Dividend Growth Sets Up Long-Term Passive Income

Increases in dividends are a good indicator of a company’s health, as these three REITs from different types of properties show. Their rising dividends indicate that management anticipates plenty of cash generation in the years to come, even though the economy is unclear in the near term.

Even though the self-storage sector is booming, CubeSmart has kept its payout ratio fair, which means there is room for even more dividend growth.

An incredible 36-year history of maintained dividends attests to Universal Health Realty Income Trust’s ability to sustain consistent distributions throughout all economic climates.

In addition to retail tenants that are resilient to economic downturns, Essential Properties has lofty expansion targets for its portfolio, which should result in increasing payouts.

Dividend growth is a powerful tool for smart investors who want to build wealth through passive income compounding over time. Reinvesting a rising dividend over decades can cause profits to snowball rapidly, although it may be sluggish and steady at initially.

Although it may be tempting to seek out big yields, the best strategy for achieving passive income compounding is to choose reasonably-funded payouts with a lengthy runway for development.

You should diversify your portfolio with dividend producers that can withstand economic downturns, as market uncertainty is a direct result of economic volatility. Regardless of market conditions, the three robust real estate investment trusts listed above will continue to generate passive income.

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John Smith is a veteran stock trader with over 10 years of experience in the financial markets. He is a widely followed market commentator known for his astute analysis and accurate predictions. John has authored multiple bestselling books explaining complex market concepts in simple terms for novice investors looking to grow their wealth through strategic trading and long-term investments.
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