Dividends Premium REITs: May 2025

Rock bottom prices, high and safe yields, 3 mega trends pushing growth: What's there for a patient, income and value investor not to like?

Editor’s Note: Happy Memorial Day weekend and welcome to your May Dividends Premium REITs.

This month’s theme is Q1 quarterly earnings for the REITs on my First Rate REIT list. These are my top picks from the broader coverage universe, drawn from a wide range of property types.

I highlight results from individual companies below, as well as my latest thoughts on investment strategy and macro trends affecting the REIT sector overall. But the number one takeaway is the price weakness this spring has little or nothing to do with actual business results, and everything to do with broad market and economic fears.

This is the kind of situation that almost always resolves eventually in favor of investors who stick with high quality stocks, such as I recommend here. So my advice remains to put current economic and political uncertainty aside and hold your positions in top quality REITs paying superior dividends.

My top fresh money buys are a great place for your spare cash, with the caveat that no one should load up on any one REIT. Diversification and balance are more critical than ever in an environment like this. So if you already own these companies, look elsewhere among the picks.

Have a question or investment issue to discuss? Then please join me in my “Dividends Roundtable” forum, which I host on the Discord application, 24-7. Thanks for reading!—RC

REITs: Cheaper On Macro Worries But Businesses Still Strong

I’m going to start this month’s issue with some wise words:

“Markets can remain irrational longer than you can remain solvent.”—John Maynard Keynes

“The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge.”—Stephen Hawking

“The surest way to really blow a hole in your portfolio is to average down in a falling stock.”—Roger Conrad

OK, that last one is probably not an original. But long-time readers have certainly read it here on enough occasions. And the relevance to today’s investment market conditions is pretty straightforward.

Mainly, you never want to commit so much money to a single stock that an unexpected freefall will create significant and tough-to-recover losses to your entire portfolio. And that means diversifying and balancing your holdings, as well as never, ever averaging down in a falling stock.

It’s painful enough to lose 50 percent in a stock that was 5 percent of your portfolio. But it’s orders of magnitude worse if you’ve effectively boosted that stock to 10, 20 or even 30 percent of your pre-crash resources, by “doubling down” as it dropped.

Losing positions in high quality stocks will recover 90 percent of the time. But that 10 percent can be deadly, especially when a sector is under selling pressure as REITs are now. And when bargains abound as they do now, it just makes no sense to place all your bets on one or two stocks.

After rallying into late 2024, real estate investment trusts as a sector are now facing some meaningful headwinds:

· Borrowing costs have not only stopped dropping from previously elevated levels but have actually started rising again.

· Rising interest rates are again diminishing the attraction of dividends.

· After picking up steam into early 2025, real estate transaction and investment activity have slowed again as REITs and their customers have become more cautious about the economy.

· Growth in occupancy rates and rents has stalled across multiple property sectors, as the North American economy has appeared to slow.

· Inflation continues to push materials costs higher, including tariffs on steel imports, threatening development budgets.

· Erratic and unpredictable statements from federal government officials regarding potential policy changes have triggered selling in the targeted sectors, for example life science. And they’re further roiling capital markets, increasing financing challenges.

REITs are still benefitting from the three mega-trends I’ve highlighted this year. And notwithstanding the current turmoil, I expect them to push best in class REITs to superior returns over the next 2 to 3 years.

Three Mega-Drivers

Front and center is growing scarcity of supply for multiple property types.