With the Federal Reserve cutting interest rates this year, it’s getting harder for income investors to find good yields. It’s also not helping matters that many companies cut or suspended their dividends in response to COVID-19, which is thinning out that field.
However, while investors have fewer higher-yielding options, they still have some good ones to choose from this month, especially in the real estate sector. Three that stand out are Camden Property Trust (NYSE: CPT), Digital Realty Trust (NYSE: DLR), Home Depot (NYSE: HD).
A top-tier landlord
Camden Property Trust is one of the leading apartment real estate investment trusts (REITs). The company currently owns interests in 164 properties containing more than 56,000 apartment homes in 14 major coastal and Sunbelt markets. The company’s communities include a mix of Class A (67%) and Class B (33%) properties in both suburban (61%) and urban (39%) markets. That diversified portfolio provides investors with broad exposure to the apartment rental market.
One other thing that stands out about Camden compared to other apartments REITs is its balance sheet strength. It’s in an elite group of REITs with A-rated credit, which it backs with one of the lowest leverage ratios in its peer group. Because of that, it’s one of the safest REITs around. That puts Camden’s dividend, which yields an above-average 3.7%, on an exceptionally firm foundation. This durability makes it a great option for investors seeking a lower-risk, higher-yielding dividend.
Decades of dividends ahead
Global infrastructure giant Brookfield Infrastructure (NYSE: BIP)(NYSE: BIPC) sees a 100-year investment cycle for data infrastructure. That bullish forecast is great news for one of its joint venture partners, Digital Realty (NYSE: DLR), which owns data centers around the world. The partners have already expanded their South American joint venture from Brazil to Mexico and Chile and expect to continue adding new locations and countries in that region in the coming years.
However, that joint venture is just one of the many growth drivers for this data center REIT. It has several other data centers under construction and in development. On top of that, it has been an active acquirer of data centers over the years. Because of that, the data-focused real estate company should have plenty of power to support and grow its 3.1%-yielding dividend. That data-driven growth and yield make it an ideal stock for investors to consider buying to hold for the long haul this month.
Cashing in on the home improvement trend
Home Depot currently yields 2.2%, which is comfortably above the S&P 500’s average of 1.8%. That dividend is on rock-solid ground because the home improvement retailer joins Camden in having A-rated credit, and its business generates durable cash flows.
That resiliency has been on full display this year during the COVID-19 outbreak. With many people stuck in their homes to help slow the spread, one of the few things they ventured out to do was shop at home improvement retailers like Home Depot to pick up supplies for their home renovation projects. Because of that, the company’s comparable sales in the U.S. surged an eye-popping 25% during the second quarter, while its earnings jumped more than 26.8% even though it had extra expenses due to COVID-19.
Meanwhile, with a tight housing market, more homeowners will likely turn to renovating instead of moving up, suggesting that the strong sales tailwind could continue for a while. That upside potential, when combined with its above-average yield, makes Home Depot look like a compelling buy for dividend investors this month, especially now that shares have cooled off a little bit from their recent runup.
Lots of ways to generate above-average income streams in real estate
Real estate can be a great way to collect a higher-yielding dividend. Further, as this trio shows, investors have lots of different options. That makes it easy to build a diversified portfolio of dividend-paying stocks that benefit from the real estate market’s continued growth.