Real estate investment trusts, or REITs, provide some of the best dividend yields in the market. That’s not surprising since they’re legally required to pay out 90% of their earnings after tax to their shareholders. 

Unlike high-yielding Dividend Aristocrats, REITs are sensitive to several market factors, like interest rate changes, inflation, leverage issues, and regulatory changes. There’s also the question of liquidity; no one wants to get stuck with a stock because nobody else is willing to buy it at a reasonable price.  

I wouldn't blame a dividend investor looking exclusively for yield. However, as a conservative investor, I prefer to also look at other qualities as well. In fact, Barchart's screening tools allow investors to easily pick additional company characteristics to help find the best possible REITs for them. For example, dividend yield is one thing, but in my experience as an equity analyst, I consider analyst ratings and liquidity as important factors. And that's how I created this list.  

How I Screened For These Stocks

To get a shortlist of the highest-yielding REITs, I first went into Barchart’s Watch List feature, which enables me to create and follow companies that are sorted according to my preference. In this case, I used my pre-prepared REITs watch list and clicked on SCREEN to get to the Screener page. 

Once there, I used four filters to get to the best and highest-yielding REITS. They were: 

• Annual Dividend %: I searched for stocks offering more than 5% in yearly dividends on a trailing twelve-month basis.
• 50-Day Average Trading Volume: I used 1,000,000 as the minimum average to ensure healthy liquidity.
• Number Of Analysts: 8 and above to ensure we don’t get buy-rated stocks with only one financial analyst firm covering it.
• Current Analyst Ratings: 4 and above to ensure we only get Wall Street-recommended, buy-rated stocks.

The results are in, and I’ve arranged them from lowest to highest dividend yield. Now, let’s discuss these three REITs and why they might be the income stock you’ve been looking for. 

Vici Properties (VICI)

Vici Properties is a REIT focusing on “experiential assets,” which aim to provide clients with hospitality and entertainment experiences. The company owns some of the country's best-known entertainment facilities, including Caesars Palace, MGM Grand, and the Venetian Resort in Las Vegas. 

2023 ended well for Vici Properties. Total revenues reached $3.6 billion, a considerable 38.9% increase YOY. Adjusted funds from operations per share—the best way to gauge a REIT’s ability to pay dividends—also saw an 11.8% bump to $2.15. 

For 2024 dividends, the company is reported to pay $1.66 per share, which translates to a 5.71% yield. However, it has a history of increasing payouts in September, so expect that number to increase by then. 

VICI stock is also actively traded, with a 50-day trade volume average of over 6 million. 21 analysts have rated it a strong buy with a solid 4.67 rating.  

Starwood Property Trust (STWD)

Starwood Property Trust is the largest commercial mortgage REIT in the US, with a portfolio of over $27 billion in its Commercial and Infrastructure Lending, Property Investing, and Investing and Servicing segments. The company provides loans of up to $500 million and operates in the US and Europe. 

Starwood Property’s 2023 report was mixed. GAAP net income decreased from $871.5 million to $339.2 million. Distributable earnings also slightly decreased from $726.3 million to $662.6 million.

Still, the company has earned a moderate buy rating from 8 analysts. Starwood also pays 48 cents quarterly, translating to a $1.92 annual rate or an excellent 9.81% forward yield. It is also well-traded, with STWD shares 50-day trading volume averaging more than 2 million.

Redwood Trust (RWT)

Redwood Trust is the highest-yielding REIT on our list today and is a common contender on many other high-yielding REIT lists. Similar to crowdfunded investment platforms, Redwood offers housing credit to residential consumers and investors and has diversified into providing early-stage venture capital. 

Redwood is the highest-yielding REIT on this list, boasting an 11.24% forward yield based on a quarterly dividend payout of 16 cents per share. It also has a moderate buy rating based on a 4.30 average from 10 analysts. Furthermore, it has a 50-day volume average of more than 1 million, making it a highly liquid investment choice. 

As for Redwood's financials, their FY’23 report saw net interest income shrink from $155 million to $93 million. However, through improvements in non-interest income, the company managed to end the year with an 11-cent loss per share, as opposed to last year’s $1.43 loss. 

Redwood's CEO Christopher Abate is quite optimistic about this year’s results. “We expect 2024 to be foundational to our long-term success,” he says, “as we expand our partnerships and distribution channels and set Redwood on a course for earnings growth and stability in the quarters and years ahead."

Final Thoughts 

REITs offer some of the best yields in the market, though they come with risks unique to the sector. Screening for key criteria allows investors to minimize such risks and choose the best REITs for their income investment needs. 

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On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.