Investing in real estate can help take your portfolio to the next level. This increases your diversification and enables you to generate passive income, thereby increasing your risk-adjusted returns. These qualities are why many financial advisors recommend that investors have some exposure to real estate investment trusts (REITs).
Here’s one REIT It should be on every investor’s radar and should be promising REIT ETFs to consider
Realty income (NYSE:O) The epitome of what a REIT should be. It owns a well-diversified portfolio of over 15,500 properties with approximately 1,650 tenants across 92 industries. It focuses on investing in safe assets for the long term Net leases With the world’s leading companies. Net leases provide more predictable and stable rental income because tenants cover all property operating costs, including regular maintenance, real estate taxes, and building insurance.
The REIT supports its high-quality portfolio with a rock-solid financial profile. It has a strong investment-grade credit rating and a conservative Dividend payout ratio. This provides financial flexibility to continue investing in income-producing properties during real estate downturns.
Realty Income’s high quality portfolio and financial profile have enabled it to deliver attractive and consistently growing payouts. Monthly dividend. The REIT’s payout currently yields more than 5%. Meanwhile, Realty Income has raised its dividend for 113 consecutive quarters. This combination of income and growth has enabled the REIT to generate a 13.7% compound annual total return since its public market listing in 1994.
The Schwab US REIT ETF (NYSEMKT: SCHH ) Makes it easier to invest broadly in the REIT sector. It invests exclusively in REITs that own commercial real estate (excl Mortgage REITs). ETFs are very low expense ratio (0.07%), making it a cost-effective way to passively invest in REITs.
While the fund currently holds more than 120 REITs, it provides concentrated exposure to the largest REITs. Its top ten holdings — which include Realty Income, the sixth-largest holding at 4.2% of its assets — comprise nearly half of its total assets. However, it still offers broad diversification across different REIT sectors, leadership Healthcare REITs at 16.6% of its holdings.
The Schwab US REIT ETF also enables investors to generate passive income (its trailing 12-month dividend yield is 3%). While ETF distributions have fluctuated over the years, payouts have increased over the long term as REITs increase their dividend payouts.
