High-Yield REITs: AGNC, IIPR, and VICI Under Spotlight

An analysis of leading REITs reveals AGNC Investment's staggering 14.9% yield may not entice income investors. Innovative Industrial Properties and VICI Properties emerge as more reliable options, reaffirming the importance of assessing both yield and company fundamentals.

Date: 16-11-2024

AI Rating: 6

The report provides a detailed examination of several real estate investment trusts (REITs) with particular emphasis on their dividend yields and overall performance. It notes that the average REIT yield of 3.9% outshines the 1.2% yield from the S&P 500 index. Among those, AGNC Investment (NASDAQ: AGNC) stands out with a striking dividend yield of 14.9%. However, it highlights a negative aspect; the yield is linked to decreasing dividends over the years, suggesting that high yields can often be misleading.

The analysis primarily critiques AGNC Investment's suitability for dividend investors, emphasizing that its focus is on total returns rather than income generation. This development presents a risk to investors who rely on consistent income from dividends. In contrast, Innovative Industrial Properties (NYSE: IIPR) and VICI Properties (NYSE: VICI) are presented as better alternatives, with yields of 7% and 5.5%, respectively.

Innovative Industrial Properties has a solid business foundation, owning properties focused on marijuana-related assets, which have promising growth potential. Its FFO payout ratio of 85% indicates a balanced approach to dividends, suggesting that there is room to absorb potential setbacks without triggering a dividend cut. Furthermore, the report notes that its dividend has been consistently increased since 2017, demonstrating reliable performance.

Meanwhile, VICI Properties benefits from stable income streams through long-term leases with significant casino operators. Its FFO payout ratio stands at 75%, which is also healthy relative to its dividend increase trajectory. This stability even during economic downturns reinforces VICI as a strong contender for income-focused investors.

Investors are cautioned against solely chasing high yields without considering the underlying business health and performance metrics. The report concludes that while AGNC offers a high yield, it becomes less attractive due to its declining dividend trajectory, while IIPR and VICI present viable alternatives backed by stronger operational performance.

Stocks: AGNC IIPR VICI