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5 High-Yield REITs With Growing Dividends

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January 24, 2012 – Comments (0) | RELATED TICKERS: SNH , UHT , NNN

Have you ever looked at your pay stub, sighed, and wished you didn't have to pay taxes? After the government gets a hold of out paycheck, what's left seems so small compared to the pretax annual salary quoted to us by our employers. The good news is some don't have to pay taxes, and it is legal. Consider this...

Way back in the 1960's the U.S. Congress created Real Estate Investment Trusts (REITs) as a way to make investing in large-scale, income-producing real estate accessible to all investors.

To qualify as a REIT, the trust must comply with IRS rules. These rules include:

  1. Distribute annually 90%+ of its taxable income as dividends
  2. Invest 75%+ of its total assets in real estate and
  3. Derive 75%+ of gross income from real estate

So what does the trust get in return for doing all this? It doesn't have to pay income taxes. The 90% distribution requirement along with no corporate income taxes are among the reasons REITs yields are often above average.

However, it is important to note that because REITs pay no income tax, they are not eligible for the special treatment as a "qualified dividends", which are normally taxed at 15%. When comparing REIT yields to investments with qualified dividends, you must always look at them on an after-tax basis.

This week week, I screened my dividend growth stocks database for REITs with a yield at or above 5% and have increased their dividends for at least 10 consecutive years. The results are presented below:

National Health Investors (NHI)
Yield: 5.8% | Years of Dividend Growth: 11
National Health Investors is a real estate investment trust that invests in income-producing health care properties primarily in the long-term care industry. The company has paid a cash dividend to shareholders every year since 2002.

Urstadt Biddle Properties (UBA)
Yield: 5.6% | Years of Dividend Growth: 17
Urstadt Biddle Properties is a real estate investment trust that acquires, owns and manages commercial real estate properties primarily in the northeastern United States. The company has paid a cash dividend to shareholders every year since 1999.

National Retail Properties, Inc. (NNN)
Yield: 5.8% | Years of Dividend Growth: 20
National Retail Properties, Inc. is an equity real estate investment trust that invests in high-quality, freestanding retail properties subject to long-term net leases with major retail tenants. The company has paid a cash dividend to shareholders every year since 1985.

Universal Health Realty Income Trust (UHT)
Yield: 6.3% | Years of Dividend Growth: 25
Universal Health Realty Income Trust is a real estate investment trust (REIT) that invests in healthcare and human service related facilities. The company has paid a cash dividend to shareholders every year since 1987.

Senior Housing Properties Trust (SNH)
Yield: 6.9% | Years of Dividend Growth: 10
Senior Housing Properties Trust, a real estate investment trust (REIT), primarily invests in senior housing properties. The company has paid a cash dividend to shareholders every year since 2000.

As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.

My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 210+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.

Full Disclosure: Long SNH, UBA, NHI in my High-Yield Portfolio and UHT, NNN in my Dividend Growth Portfolio. See a list of all my dividend growth holdings here.

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