It’s been almost two long years of Federal Reserve interest rate hikes, and while the recent data surprised to the upside, the good news for investors is that they probably won’t announce any more rate hikes. The bad news is they could hold rates at the current 5.25%-5.50% well into this year with no cut until the summer or, in the worst case, the fall.
One great idea now, especially with the Federal Reserve likely finished with the rate hikes, is real estate investment trusts or REITs. REITs are a practical way to own commercial and residential real estate, and many pay among the best dividends of any asset class.
For contrarian investors, REITs may still be at the most significant discount in years after the interest rate hikes. While selection is critical, and the recurring bank issues could crimp lending, the top companies will survive and offer huge total return potential.
We screened our 24/7 Wall St. REIT dividend research database, looking for the companies paying the best dividends, and five top companies look like great ideas for investors searching for dependable passive income now.
Arbor Realty Trust
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This company trades at a ridiculous 7.3 times estimed 2024 earnings and pays a massive 13.11% dividend. Arbor Realty Trust (NYSE: ABR) invests in a diversified portfolio of structured finance assets in the multifamily, single-family rental, and commercial real estate markets in the United States.
The company operates in two segments:
- Structured Business
- Agency Business.
Arbor Realty Trust primarily invests in:
- bridge and mezzanine loans, including junior participating interests in first mortgages and preferred and direct equity
- real estate-related joint ventures
- real estate-related notes
- various mortgage-related securities
The company offers:
- Bridge financing products to borrowers who seek short-term capital to be used in an acquisition of property
- Financing by making preferred equity investments in entities that directly or indirectly own real property
- Mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan and senior to the borrower’s equity in a transaction;
- Junior participation financing in the form of a junior participating interest in the senior debt
- Financing products to borrowers who are looking to acquire conventional, workforce, and affordable single-family housing
Further, it underwrites, originates, sells, and services multifamily mortgage loans through conduit/commercial mortgage-backed securities programs.
Ellington Financial
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This is a quality mortgage REIT company that is a favorite across Wall Street and pays a massive 14.77% dividend. Ellington Financial Inc. (NYSE: EFC), through its subsidiary, Ellington Financial Operating Partnership LLC, acquires and manages mortgage-related, consumer-related, corporate-related, and other financial assets in the United States.
The company develops and manages residential mortgage-backed securities (RMBS) backed by:
- Prime jumbo
- Alt-A, manufactured housing, and subprime residential mortgage loans
- RMBS for which the principal and interest payments are guaranteed by the U.S. government agency or the U.S. government-sponsored entity; residential mortgage loans
- Commercial mortgage-backed securities
- Commercial mortgage loans and other commercial real estate debt
Ellington Financial also provides:
- Collateralized loan obligations;
- Mortgage-related and non-mortgage-related derivatives
- Corporate debt and equity securities
- Corporate loans; and other strategic investments
In addition, the company offers consumer loans and asset-backed securities backed by consumer and commercial assets.
KKR Real Estate Finance Trust
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Run by an experienced Wall Street giant and paying a huge 10.37% dividend. This is a solid idea for more conservative investors. KKR Real Estate Finance Trust Inc. (NYSE: KREF) is a mortgage real estate investment trust, that focuses primarily on originating and acquiring transitional senior loans secured by commercial real estate (CRE) assets.
It engages in the origination and purchasing of credit investments related to CRE, including leveraged and unleveraged commercial real estate loans.
The company has elected to be taxed as a real estate investment trust and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders.
Omega Healthcare Investors
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This stock makes sense with an aging population and a significant 8.71% dividend. Omega Healthcare Investors, Inc. (NYSE: OHI) is a REIT that invests in the long-term healthcare industry, primarily in skilled nursing and assisted living facilities.
The company is focused on owning Skilled Nursing Facilities (SNFs). Most of its assets are SNFs but Omega Healthcare also owns assisted living facilities, specialty facilities and a medical office property.
Its portfolio of assets is operated by a diverse group of healthcare companies, predominantly in a triple-net lease structure. The assets span all regions within the U.S., as well as in the U.K.
The company has increased the dividend paid to shareholders every year since 2003, and the annual dividend growth rate comes in at a solid 4.80%.
Starwood Property Trust
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This is a high-yielding company run by real estate legend Barry Sternlicht that offers big-time total return potential and a 9.72% dividend. Starwood Property Trust, Inc. (NYSE: STWD) operates as a real estate investment trust (REIT) in the United States, Europe, and Australia.
It operates through four segments:
- Commercial and Residential Lending
- Infrastructure Lending
- Property, and Investing
- Servicing segments
The Commercial and Residential Lending segment originates, acquires, finances, and manages:
- Commercial first mortgages
- Non-agency residential mortgages
- Subordinated mortgages
- Mezzanine loans
- Preferred equity
- Commercial mortgage-backed securities (CMBS)
- Residential mortgage-backed securities, as well as other real estate and real estate-related debt investments, including distressed or non-performing loans
The Infrastructure lending segment originates, acquires, finances, and manages infrastructure debt investments.
The Property segment engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties, such as multifamily properties and commercial properties subject to net leases, that are held for investment.
The Investing and Servicing segment manages and works out problem assets;
- Acquires and manages unrated, investment grade, and non-investment grade rated CMBS comprising subordinated interests of securitization and re-securitization transactions
- Originates conduit loans for the primary purpose of selling these loans into securitization transactions
- Acquires commercial real estate assets that include properties received from CMBS trusts
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