In today’s time, REITs are one of the top-performing sectors within the S&P 500, as an attractive option for passive income investors looking for steady cash flow and the potential for capital appreciation. Therefore, you might consider watching top high-yielding REITs Realty Income Corporation (O), VICI Properties Inc. (VICI), and Annaly Capital Management, Inc. (NLY) with potential growth prospects.

REITs are an effective choice for investors looking to increase cash flow while enjoying some tax efficiency. REITs must distribute at least 90% of their taxable income to shareholders as dividends. This further enhances the appeal of REITs among U.S. investors, as they can often benefit from reduced tax rates on qualified dividends.

According to an EY report, the REIT portfolio includes over 575,000 properties, creating 3.4 million U.S. jobs that generate labor income of $262.90 billion. Further, the global REIT market is projected to grow by $350.20 billion by 2028, exhibiting a CAGR of 2.9%.

The optimistic look is underpinned by several key factors, such as a resilient job market, persistently high homeownership costs pushing more people towards renting, and the growth of technology hubs.

Moreover, as per S&P Global reports, the most considerable dividend growth is expected to be in industrial REITs, which is anticipated to grow by 14.4% in 2025. Also, the dividends in 2025 are expected to grow by 5.5% at a CAGR of 7.5%. This provides a compelling option for income-focused investors aiming to diversify their portfolios.

Considering this favorable backdrop, let’s assess the fundamentals of the three REIT picks.

Realty Income Corporation (O)

O is a monthly dividend company and an S&P 500 Dividend Aristocrats index member. The company is engaged in acquiring and managing freestanding commercial properties that generate rental revenue under long-term net lease agreements with its commercial clients and supports its monthly dividends through cash flow from over 15,450 real estate properties.

On November 8, demonstrating its commitment to returning value to shareholders, the company declared the 653rd consecutive monthly dividend of $0.26 per common share. This dividend will be paid on December 13, 2024, to shareholders on record as of December 2, 2024.

With 26 years of consecutive dividend growth, O pays an annual dividend of $3.16, which translates to a yield of 5.48% at the current share price. Its four-year average dividend yield is 4.73%. Moreover, its dividend payouts have increased at CAGRs of 4.5% and 3.6% over the past three and five years, respectively.

In terms of the trailing-12-month AFFO/total revenue, O’s 89.04% is 115.7% higher than the 41.28% industry average. Similarly, its 9.79% trailing-12-month EBITDA margin is 89.45% higher than the industry average of 53.84%. Also, its trailing-12-month ROTC of 2.35% compares to the industry average of 2.12%.

During the fiscal third quarter that ended September 30, 2024, O’s total revenue amounted to $1.33 billion, with a 28.1% year-over-year increase in its site leasing revenue. Its annualized pro forma adjusted EBITDA stood at $4.94 billion, up 28.8% year-over-year. Moreover, the company’s diluted AFFO and AFFO per share amounted to $917.04 million and $1.05, respectively, increasing 26.9% and 2.9% from the prior year’s period.

According to the full-year 2024 guidance, O forecasts net income per share from $1.15 to $1.20. The company also expects AFFO per share to be between $4.17 and $4.21.

The consensus revenue estimate of $1.25 billion for the fiscal fourth quarter (ending December 2024) represents a 21.6% increase year-over-year. The consensus FFO estimate of $1.07 for the current quarter indicates a 9.3% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue in each of the trailing four quarters.

Over the past year, the stock has surged 13.9%, closing the last trading session at $57.02.

O’s stance is apparent in its POWR Ratings. Among the 28 stocks in the REITs - Retail industry, it is ranked #12. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Click here to see the additional O ratings (Growth, Value, Momentum, Stability, Sentiment, and Quality).

VICI Properties Inc. (VICI)

VICI is an S&P 500 experiential REIT that is engaged in the business of owning and acquiring gaming, hospitality, and entertainment destinations, subject to long-term triple net leases, including Caesars Palace Las Vegas, MGM Grand, and The Venetian Resort Las Vegas, three of the most iconic entertainment facilities.

Buoyed by strong financial performance, the company paid its shareholders a quarterly dividend of $0.43 per share on October 3, 2024.

VICI pays an annual dividend of $1.73, which translates to a yield of 5.53% at the current share price. Its four-year average dividend yield is 4.91%. Moreover, the company’s dividend payouts have increased at a CAGR of 7.7% over the past five years.

The stock’s trailing-12-month EBIT margin of 96.10% is 333.1% higher than the industry average of 22.19%. Similarly, its 32.46% trailing-12-month FFO/Total revenue is 69.63% above the industry average of 40.73%.

VICI’s total revenue for the fiscal third quarter that ended September 30, 2024, increased 6.7% year-over-year to $964.67 million. The company’s attributable net income came in at $732.89 million, representing an increase of 31.7% from last year.

In addition, AFFO and AFFO per share attributable to VICI common stockholders stood at $593.86 million and $0.57, up 8.4% and 5.6% year-over-year, respectively. Furthermore, its adjusted EBITDA rose 7.1% from the prior year’s period to $778 million.

As per the updated financial guidance for the full year 2024, VICI now forecasts AFFO to be in the range of $2.36 billion-$2.37 billion. The company expects AFFO per share to be in the range of $2.25 to $2.26.

Street expects VICI’s FFO for the fiscal first quarter (ending March 2025) to increase 18.1% year-over-year to $0.67. Its revenue is expected to increase 1.9% year-over-year to $969.52 million. Further, VICI topped the street revenue estimates in three of the trailing four quarters, which is promising.

Shares of VICI have gained 9.6% over the past year to close the last trading session at $31.20.

VICI’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It also has a B grade for Stability, Sentiment, and Quality. Within the REITs - Hotel industry, it is ranked first out of 16 stocks. Click here to see VICI’s ratings for Growth, Value, and Momentum.

Annaly Capital Management, Inc. (NLY)

NLY is a diversified capital manager with investment strategies across mortgage finance. It also invests in agency mortgage-backed securities collateralized by residential mortgages, non-agency residential whole loans and securitized products within the residential and commercial markets, mortgage servicing rights, agency commercial mortgage-backed securities, and more.

On October 31, the company paid a quarterly dividend of $0.65 per share. NLY pays an annual dividend of $2.60, which translates to a yield of 13.11% at the current share price. Its four-year average dividend yield is 13.55%.

In the same month, NLY and Rocket Mortgage, the nation’s largest mortgage lender and a part of Rocket Companies, Inc. (RKT), entered into a sub-servicing agreement. Under this agreement, Rocket Mortgage will manage a portion of NLY’s serviced clients, and NLY will have the same retention rates as Rocket. This strategic relationship will enhance its mortgage servicing capabilities on the platform.

NLY's trailing-12-month net income margin and gross profit margin of 31.43% and 86.72% are 44.2% and 44.7% higher than their respective industry averages of 21.81% and 59.95%.

In the fiscal third quarter that ended September 30, 2024, NLY’s net interest income came in at $60.51 million compared to a year-ago net loss of $57.83 million, while the net servicing income grew 33.9% from the year-ago value to $320.36 million.

Also, the company’s net income available to common stockholders stood at $24.82 million compared to the prior-year quarter’s loss of $46.64 million, and its net income per share came in at $0.05 versus a loss of $0.09 per share last year.

Analysts expect NLY’s revenue and EPS for the current year (ending December 2024) to be $1.25 billion and $2.64, respectively. For the fiscal year 2025, its revenue and EPS are expected to grow by 36.3% and 4.6% from the prior year to $1.70 billion and $2.76, respectively.

The stock has gained 14.5% over the past year to close the last trading session at $19.48.

NLY’s fundamentals are reflected in its POWR Ratings. The stock has a B grade for Growth. It is ranked #10 out of 27 stocks in the REITs - Mortgage industry.

Beyond what is stated above, we’ve also rated NLY for Value, Momentum, Stability, Sentiment, and Quality. Get all NLY’s ratings here.

What To Do Next?

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O shares were trading at $56.76 per share on Wednesday afternoon, down $0.26 (-0.46%). Year-to-date, O has gained 3.56%, versus a 27.05% rise in the benchmark S&P 500 index during the same period.

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