Real estate investment trusts, or REITs, are publicly traded companies that invest in real estate.
By law, REITs must pay out at least 90% of their taxable income to shareholders, which means many of the best REITs have extremely high dividend yields.
Analysts say the 3 stocks below are among the best REITs to buy. With so many choices, it can be easy to overlook some great options.
Here are our three top REITs ideal for those seeking to generate passive income.
First Pick: Orchid Island Capital Inc (NYSE: ORC)
Current Share Price: Under $3
Current Dividend Yield: 22.92%
Current Payout Rate: Monthly
Orchid Island Capital, Inc., a specialty finance company, invests in residential mortgage-backed securities (RMBS) in the United States.
The company's RMBS is backed by single-family residential mortgage loans, referred as Agency RMBS.
Its portfolio includes traditional pass-through Agency RMBS, such as mortgage pass through certificates and collateralized mortgage obligations; and structured Agency RMBS comprising interest only securities, inverse interest only securities, and principal only securities.
The company qualifies as a real estate investment trust for federal income tax purposes.
Orchid Island Capital, Inc. was incorporated in 2010 and is based in Vero Beach, Florida.
Second Pick: ARMOUR Residential REIT (NYSE: ARR)
Current Share Price: $7
Current Dividend Yield: 16.37%
Current Payout Rate: Monthly
ARMOUR Residential REIT, Inc. invests in residential mortgage-backed securities (MBS) in the United States.
The company's securities portfolio primarily consists of the United States Government-sponsored entity's (GSE) and the Government National Mortgage Administration's issued or guaranteed securities backed by fixed rate, hybrid adjustable rate, and adjustable-rate home loans, as well as unsecured notes and bonds issued by the GSE and the United States treasuries, as well as money market instruments.
It also invests in other securities backed by residential mortgages for which the payment of principal and interest is not guaranteed by a GSE or government agency.
The company has elected to be taxed as a real estate investment trust under the Internal Revenue Code.
As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders.
ARMOUR Residential REIT, Inc. was incorporated in 2008 and is based in Vero Beach, Florida.
Third Pick: National Retail Properties (NYSE: NNN)
Current Share Price: $46
Current Dividend Yield: 4.71%
Current Payout Rate: Quarterly
You might be thinking to yourself “Wait, this isn't high-yield?!”… We wanted to include it in our list because National Retail Properties is one of the most reliable dividend REITs right now, and we believe it's important to have added security when building a portfolio.
For the past 20 years, National Retail Properties has provided an 11.6% total annual return, outpacing the S&P 500 during that same time while increasing its dividend by 65%. It has raised its dividends for 32 consecutive years.
The company is also in a strong financial position with $53.7 million of cash on hand and no debt maturities until 2024.
Its 4.71% return makes a $10,000 investment go a long way.
National Retail Properties invests primarily in high-quality retail properties subject generally to long-term, net leases.
As of September 30, 2020, the company owned 3,114 properties in 48 states with a gross leasable area of approximately 32.4 million square feet and with a weighted average remaining lease term of 10.7 years.
National Retail Properties is based in Orlando, Florida.
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