In times like these, with indexes at highs and investors getting crazy (e.g., short-squeeze mania), buying a high-dividend-paying real estate stock or two can help you focus on other things. You know, like tracking the income your portfolio produces instead of the ups and downs of volatile stock prices. If that sounds like a good thing, here’s a primer on high-yielding W.P. Carey (NYSE: WPC), Broadmark Realty (NYSE: BRMK), and National Health Investors (NYSE: NHI).
1. Smooth sailing
W.P. Carey owns a portfolio of net lease assets, which means its tenants are responsible for most of the operating costs of the properties they occupy. Generally considered a fairly low-risk segment of the real estate sector, W.P. Carey takes things a little further. It also spreads its portfolio across industrial (24{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} of rents), warehouse (23{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb}), office (23{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb}), retail (17{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb}), and self-storage (5{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb}) property types. But that’s not the end of the story — it also generates around 37{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} of its rents from outside the United States, largely Europe.
You know diversification is good for your portfolio, but it’s also good for a real estate investment trust’s (REIT’s) portfolio. The proof of that comes from early in the 2020 coronavirus pandemic, when W.P. Carey’s worst month of rent collections (May) was an impressive 96{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb}. It’s basically as if nothing happened, with the number up to 99{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} in December.
Longer term, the REIT has increased its dividend every single year since its IPO in 1998, an over two decade-long run. Add in a generous 6.1{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} dividend yield, and the story is complete and compelling.
2. Helping build the future
Next up is Broadmark Realty, a mortgage REIT. Normally mREITs are a pretty risky area of the REIT space, marked by high leverage and uncertainty. But Broadmark upends that model.
For starters, the company is what’s known as a hard money lender. That means it provides short-term loans to construction companies, getting repaid when the building is complete or sold. Broadmark only provides loans worth around 60{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} of the expected sales price of a property, so there’s a good deal of leeway before it would take a hit. And it doesn’t make use of leverage, sporting a debt-free balance sheet. Companies without debt can weather market storms more easily.
But the really interesting thing is that Broadmark is looking to grow. At the end of the third quarter in 202, it had $174 million of cash on its balance sheet that it wanted to put to work with new loans. The first quarter 2021 dividend, meanwhile, was increased 17{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb}, suggesting that it had done just that, with more investment likely on the way.
To be fair, the roughly year-old REIT cut its dividend 25{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} during the worst of the pandemic, but that was related to construction delays from the coronavirus, not a breakdown of its business model. By the third quarter, business was largely back to normal. With a fat 8{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} or so dividend yield, this unique mortgage REIT is worth a closer look.
3. A needed service
National Health Investors is a healthcare REIT with a portfolio spread between nursing homes (27{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} of revenue), assisted living (32{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb}), and well senior housing (37{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb}). It’s basically in the center of the coronavirus storm, since its properties are built to bring older adults into the very group settings in which the novel illness tends to spread among the most impacted age groups.
It hasn’t been easy, with occupancy at some of its properties down to around the mid-70{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} area from the mid-80{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} range before the pandemic began. National Health Investors is working with its tenants to help them muddle through this period, providing things like rent deferrals to ease the financial hit.
But that means National Health Investors is feeling the pain instead, at least temporarily. The key here, however, is that the demographics of an aging population haven’t changed — more and more people will need the services provided by the REIT’s properties over time. So occupancy is likely to pick up again once the world moves past the pandemic.
And while there could be a near-term hit to the REIT’s business, it’s held up reasonably well so far, with adjusted funds from operations up just slightly year over year in the third quarter. It even managed to increase its dividend in 2020. With a 6.6{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} yield and a business with demographic tailwinds, more aggressive investors might want to take a closer look.
A side benefit of dividends
The big thing investors like about dividends is that they provide a stream of cash. But there’s another aspect of dividend stocks that shouldn’t be ignored: When times get tough, investors can watch their dividends and ignore the broader market’s gyrations. With all of the hoopla around short squeezes today, boring high-yield dividend stocks like W.P. Carey, Broadmark, and National Health Investors could be just what your portfolio — and perhaps emotions — need.
