Financial markets have not been pleased by reports of a possible recession. Even though the S&P 500 index has lost 16% so far in 2022, its dividend yield is still just 1.6%.
Income investors will not be pleased by this at all. This brings up the issue: What options do yield-focused investors have? Land venture trusts (REITs) can be incredible speculation vehicles to consider. This is because they are exempt from corporate taxation if they give shareholders at least 90% of their taxable income.
The following are two REITs that are expanding quickly and offer dividend yields of at least 4% to income investors.
1. New Industrial Qualities:
The market leader in cannabis real estate Public policy frequently lags behind popular opinion. When it comes to cannabis, perhaps nowhere is this more evident. This is supported by the fact that 93% of Americans support patient access to medical-use cannabis and 68 percent support cannabis’ full legalization.
The regulated cannabis industry in the United States is anticipated to nearly double from $24 billion in 2020 to $46 billion in 2026 as more states legalize cannabis. Innovative Industrial Properties (IIPR 0.98%), a cannabis REIT, stands to gain the most from this unstoppable trend.
Innovative Industrial is the most well-known cannabis REIT, with 111 properties in 19 states worth $2.6 billion. It should come as no surprise that the company has invested $368.6 million in new investments during the first nine months of this year because it is the most well-known and trusted brand in the industry. Rent revenue and adjusted funds from operations (AFFO) per share have increased by double digits as a result of this so far in 2022.
The dividend yield of Innovative Industrial is quadruple that of the S&P 500 index, which is 1.6%. In addition, there is a sufficient safety margin to withstand tenant defaults like Kings Garden, as evidenced by the dividend payout ratio of 82.2 percent in the most recent quarter.
In the years to come, the REIT might have to deal with tenant defaults from time to time. However, given that the stock’s trailing 12-month (TTM) price-to-AFFO-per-share ratio is 13.5, this risk may already be priced in. Given Imaginative Modern’s powerful development prospects, a valuation various in the low teenagers makes it an easy decision purchase for money financial backers.
2. Crown Palace Worldwide:
A wager on rising mobile data consumption In developed economies like the United States, smartphones are practically ubiquitous. Additionally, the infrastructure of Crown Castle International (CCI -4.13%), a pure-play U.S. cell tower REIT, enables Americans to shop online, check their email, and browse the internet on a daily basis.
Crown Castle owns more than 40,000 cell towers, 115,000 small cells, and 85,000 route miles of fiber optic cable, giving you an idea of how big the company is. These cell towers and small cells are leased by major telecom companies like Verizon (VZ -1.08%) in order to provide customers with mobile data. More cell towers, small cells, and fiber will need to be built in the future because the average monthly mobile data consumption in the United States is expected to rise from 21.9 gigabytes (GB) in 2022 to 54.2 GB by 2027.
In addition to annual lease escalators for existing infrastructure, this should result in annual dividend growth of 7% to 8% over the next few years. This is an excellent combination of starting income and growth potential when paired with a dividend yield of 4.5 percent. Additionally, the dividend is fairly well covered, as the dividend payout ratio is expected to reach 81.2% in 2022.
The fact that the stock is trading at a forward price-to-AFFO-per-share ratio of approximately 19 at the current share price of approximately $143 is the cherry on top that makes Crown Castle a buy for income investors. For the high single digit annual growth that Crown Castle is able to provide to its shareholders, that is not a very expensive valuation.