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3 No-Brainer High Yield Dividend Stocks to Buy for $1,000 Right Now

These REITs can generate a lot of passive income.

After much speculation, the Federal Reserve has finally begun to cut interest rates. Lower rates should be a boon for the real estate sector. It will reduce borrowing costs and should boost property valuations.

This means real estate investment trusts (REITs) shows that they are not buying right now, especially for those looking for a profitable income stream. Real estate income (A 1.12%), Mid-America Apartment Communities (MAA 0.74%)and Prologue (PLD 0.93%) they all have dividend yields over 3%, more than double S&P 500 dividend yield (less than 1.5%). That makes them great REITs to buy for income and growth potential right now.

A forward acceleration

Real estate income currently generates more than 5%. At this rate, could turn a $1,000 investment into an annual passive dividend income of over $50.

The diversified REIT has a tremendous track record of paying dividends. It has paid over 650 consecutive monthly dividends, including increasing payouts 127 times since going public in 1994 and for 108 straight quarters. It increased its dividend at a compound annual rate of 4.3%, which helped it deliver a compound annual rate of 13.5%. total return from its public listing.

Realty Income is in a strong position to continue raising its dividend. The REIT’s main growth driver is its ability to acquire income-producing properties. It can raise its adjusted funds from operations (FFO) by about 0.5% per share for every billion dollars of increased investment it finances externally (issuing new debt and equity). It at present is expected to invest about $3 billion in new properties this year, which is down from recent years due to higher interest rates (it also acquired another REIT in a $9.3 billion deal).

With rates expected to fall, Realty Income should be able to ramp up acquisition volume and grow even faster. This should increase its ability to increase its dividend.

A re-acceleration awaits

Mid-America Apartment Communities (MAA) is a leading apartment REIT focused on Sunbelt markets. The owner currently offers a dividend yield of over 3.5%. It has paid 122 consecutive quarterly dividends and raised its payout for 14 consecutive years, including by 5% at the end of last year.

The REIT is benefiting from strong demand for apartments in its markets. This keeps occupancy levels high and tends to drive rents above average.

An increase in new supply has slowed rent growth to an acceleration in recent quarters (0.5% in the second quarter). That headwind should fade in the second half of this year and into 2025 as its markets absorb this new supply. This should lead to a re-acceleration in rent growth.

Meanwhile, MAA has started to step up its investment activities to capitalize on the expected rental revival. Recently purchased a newly constructed multi-family property. It also has seven communities under construction and expects to break ground on four to six more projects in the next two years. The combination of accelerating rent growth and its investments to expand its portfolio should allow the REIT to further increase its dividend.

A speed on the path to more growth ahead

Prologis currently produces more than 3%. The leading industrial REIT has an excellent track record of growing its payout. It has grown its dividend at a compound annual rate of 13% over the past five years, more than double the S&P 500 average (5% compound annual growth).

The warehouse owner hit a slight slowdown this year. Higher interest rates hurt customer demand, causing the REIT to cut its guidance earlier for 2024. Despite this near-term headwind, core FFO is still expected to grow nearly 8% on action this year.

Meanwhile, it sees a re-acceleration going forward, driven by growing demand for storage space and limited future supply. It sees its core FFO growing 9% to 11% per share through 2026. In addition to strong warehouse demand, the REIT is beginning to tap into new growth drivers such as energy and data centers. These catalysts could increase the long-term growth rate, potential allowing it to continue growing its dividend at a well-above-average annual rate.

A great time to buy these top REITs

Realty Income, MAA and Prologis pay high-yielding dividends that have historically grown at healthy rates. While they all face some short-term growth headwinds from higher rates, these should disappear as they begin to decline. Because of this, they look like no-brainer buys right now for those looking for income and growth potential.

Matt DiLallo has positions in Mid-America Apartment Communities, Prologis and Realty Income. The Motley Fool has positions in and recommends Mid-America Apartment Communities, Prologis and Realty Income. The Motley Fool recommends the following options: Long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.

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