The Smartest Dividend Stocks to Buy for $500 Right Now

Interest rates have risen in recent years as the Federal Reserve has tried to stamp out stubborn inflation. While inflation is finally starting to moderate, the Federal Reserve has signaled that it will cut rates several times in the coming months.

Higher rates have had a particularly notable impact on real estate investment trusts (REITs). They have to borrow a lot of money to finance the acquisitions and development of the property.

Given their leverage over interest rates, REITs should benefit when they start to fall. That makes them some of the smartest dividend stocks to buy right now for those with a little cash to put to work. Three excellent REIT options are Real estate income (A -0.48%), Mid-America Apartment Communities (MAA -0.05%)and Prologue (PLD -1.44%).

A constant grower with a catalyst

Real estate income stocks are currently more than 15% below their peak FROM three years ago when interest rates were lower. Because of this decline, its dividend yield is over 5% these days. It is several times higher than sub-1.5% dividend yield of S&P 500. At this rate, The REIT can turn a $500 investment into dividend income of over $25 each year.

Lower rates should benefit real estate income. It will do it is cheaper for REITs to borrow money to finance acquisitions and development projects. This could allow him to invest more money in growing his portfolio in the future.

The diversified REIT has a stellar growth record. It has has increased its dividend for 108 consecutive quarters and 127 times overall since going public in 1994. With interest rates shifting from a headwind to a tailwind, the REIT should have no problem expanding its portfolio and payouts going forward.

Its headwinds will soon be it fades

Shares of apartment REIT Mid-America Apartment Communities have lost nearly 30% of their value since a few years ago. That’s partly because higher rates have hurt the value of apartment buildings because financing for these properties is more expensive. This drop increased the dividend yield by more than 3.5%.

Another issue affecting Mid-America has been an increase in the supply of new apartments, driven by a post-pandemic construction boom since rates were much lower. Its markets they are constantly absorbed that new supply as residents move into those brand new apartments.

On a positive note, higher rates in recent years have caused a significant slowdown in new apartment construction. Because of this, the REIT expects shipments to decline in the coming months. This catalyst should lead to a re-acceleration in rent growth.

Meanwhile, the REIT began to go on the offensive by acquiring new communities and approving development projects. These investments should help accelerate its growth in the coming years. added its high-yielding and steadily growing dividend, and this apartment REIT has strong total return potential.

Robust return potential

Shares of leading industrial REIT Prologis are down about 25% from their peak a few years ago. This drop brought the dividend yield to around 3%.

An important factor was the impact of higher interest rates on the tenant base. It has caused some current and prospective tenants to delay making rental decisions this year. This indecision led the REIT to cut its 2024 guidance.

However, the company sees this as just a temporary setback for a few quarters. In the long term, Prologis is optimistic that demand for storage space will continue to grow. This leads him to believe that his funds from operations (FFO) will increase at an accelerated pace in the following years.

In addition, it plans to capitalize on new growth opportunities such as data centers and energy, to further accelerate its growth prospects. This should allow it to continue growing its dividend at a well above average rate. These factors also position REITs TO potential produces superior total returns in subsequent years.

A smart one time to buy REITs

Interest rates are moving from a major headwind to a significant headwind tailwind for REITs. Lower rates will lower their borrowing costs while increasing the value of their real estate. This catalyst positions investors to win strong returns from REITs in the coming years, making leaders like Realty Income, Mid-America Apartment Communities and Prologis look like intelligent buy right now.