One of the best sectors in the stock market for producing income is the REIT sector. The term REIT is an acronym that refers to real estate investment trusts, and these stocks that focus on real estate have to pay out a high percentage of their income to investors.
If you’re looking for instant diversification in the REIT sector, it would be hard to go wrong with Vanguard’s Real Estate ETF, which goes by the ticker symbol VNQ. Effectively, this is a basket of REITs, and it generally provides a yield that approaches 4%. Instead of risking your money on a single stock, you’ll buy a stake in more than 180 REIT stocks. If one REIT in the fund collapses, you’ll have 180 more to provide you with income. Additionally, an investment in VNQ can provide sector diversification. Rather than focusing only on retail properties, an investor in this Vanguard ETF can access retail REITs, industrial REITs, hotel and vacation REITS and other sectors of the real estate industry.
Realty Income Corp.
One of the top REITs for investors is Realty Income Corp. It’s also one of the most popular. This stock goes by the ticker symbol O, and its popularity is generally tied to its monthly dividend payout and its quarter-century record of paying out increased dividends annually. The yield can vary quite a bit with O because REITs tend to be fairly volatile when interest rates change. However, it’s a steady option for those looking for monthly income.
According to the experts at Money Morning, “The storage real estate market is nearly recession proof.” Americans like to buy stuff, and when they accumulate too much of it, they tend to store it in long-term storage facilities. They pay for this privilege, and it can really pay off for investors who own the storage space. One of the bigger REITs in the public storage space is named Public Storage. This company pays out a healthy yield of more than 3.7% as of September 2020, and its price and dividend has grown at a healthy rate over a period of decades. That makes it a great option for those looking to bring in some steady income.
STORE Capital Corporation
One of the biggest investors in STORE Capital is none other than Warren Buffett. His conglomerate Berkshire Hathaway has held shares since 2017, and it’s the only real estate stock Buffett owns. While he was selling many bank shares earlier this year, the Oracle of Omaha bought more shares of STORE. This REIT focuses on single tenant operational real estate, and the first letter of this focus contributes the company’s name. Its yield currently approaches 5%. This can provide a good level of cash flow for income-focused investors.
While the top REITs can provide a good deal of growth over time, most REIT investors focus on the income that they can offer. While these are not the only four options in the REIT sector, they are great options for those looking to invest in REIT stocks.