Investing in REITs offers several advantages similar to traditional real estate investment, such as capital appreciation — as the value of the properties increases over time — and an option to diversify investment portfolios, reducing the overall risk.
Moreover, REITs’ stability is rooted in their focus on income-generating properties, typically leased to tenants under long-term contracts — a structure that ensures consistent cash flow distributed to shareholders as dividends.
For this analysis, I screened for REITs with an annual dividend yield of over 5% and strong analyst Buy ratings. I also considered the company’s reported yearly funds from operations, or FFO, which indicates the REIT’s ability to pay dividends. (The stock is a good buy if the FFO exceeds the dividend rate.)
Then, I sorted the list from the lowest to highest yield, and here are the top three high-yield real estate stocks I found.
UMH Properties (UMH)
UMH Properties (NYSE:UMH) is a prominent REIT that owns thousands of manufactured home communities across the United States. The company leases homesites within these communities to residents and offers leasing options for manufactured homes. In addition, through a wholly-owned subsidiary, the company facilitates the sale and financing of manufactured homes for both current and prospective residents of its communities. The communities under the company’s ownership span various regions, including the Northeast, Southeast and Midwest.
UMH Properties has recently increased its unsecured credit facility from $180 million to $260 million. The facility is syndicated among three banks: BMO (NYSE:BMO), JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC). The credit facility will enhance the company’s liquidity as it continues to execute its growth strategy.
UMH delivered decent results in 2023. Total income was $220.9 million, 13% higher year-over-year (YoY). Meanwhile, normalized FFO per diluted common share reached 86 cents. The company pays a forward dividend of 82 cents a quarter, representing a 5.16% yield. With all the growth factors, analysts have issued a consensus rating of Strong Buy for UMH stock.
Cousins Properties (CUZ)
Maximizing opportunities in prime locations, Cousins Properties (NYSE:CUZ) is a huge player in the real estate sector. As a self-administered REIT, the company primarily invests in Class A office buildings across the Sun Belt markets of the U.S. through its subsidiary, Cousins Properties LP (NASDAQ:CPLP). The company classifies its segments by property type, including Office and Non-Office, and by geographical area, including key markets such as Atlanta, Austin, Charlotte, Dallas, Phoenix, Tampa and others.
Cousins Properties’ Q1’24 report revealed a modest revenue increase to $208.8 million compared to $200 million YoY. Still, the company experienced a slight decline in net profit, which fell to $13.29 million.
Despite the mixed results, Cousins Properties remains optimistic about its future prospects. Its reported FY’23 FFO per share is at $2.62, with FY’24 guidance between $2.60 and $2.67. Meanwhile, Cousins Properties offers an attractive annual dividend of $1.28, resulting in a yield of 5.41%. Given the company’s potential for growth, analysts consider it one of the best high-yield real estate stocks and recommended CUZ as a Strong Buy.
CTO Realty Growth (CTO)
As a trailblazer REIT, CTO Realty Growth (NYSE:CTO) has solidified its position by building a portfolio of retail properties in the most promising U.S. markets. The company operates through four segments: management services, commercial loans and investments, real estate operations and income properties. CTO Realty Growth manages Alpine Income Property Trust (NYSE:PINE), holds commercial loans and preferred equity investments, owns subsurface mineral interests in Florida and maintains an inventory of mitigation credits.
CTO Realty Growth recently announced the pricing of a public offering of 1.5 million additional shares of its 6.375% Series A Cumulative Redeemable Preferred Stock at $20.00 per share, with an option for underwriters to purchase up to 225,000 additional shares. The company plans to allocate the roughly $30 million net proceeds from the offering towards general corporate and working capital needs.
From a financial perspective, CTO Realty Growth delivered impressive results in FY’23. Its revenue rose from $82.32 million to $109.12 million YoY. CTO’s AFFO for 2023 also reached $1.91, an increase that comfortably covers the company’s $1.52 annual dividend, which translates to an 8.77% yield.
The decent yield and solid financial performance have contributed to CTO’s Strong Buy ratings from analysts, making CTO one of the best high-yield real estate stocks in the market.
On the date of publication, Rick Orford did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Rick Orford is a Wall Street Journal best-selling author, investor, influencer, and mentor. His work has appeared in the most authoritative publications, including Good Morning America, Washington Post, Yahoo Finance, MSN, Business Insider, NBC, FOX, CBS, and ABC News.