Long-term capital appreciation in stocks is one of the best ways to save for retirement. Over decades, you can count on 8% or more annual returns that compound into enough to retire on. In the short-term, however, market volatility can cause even the most long-term focused investors to lose sleep.

One way to keep the faith through downturns is to add some conservative dividend paying stocks to your portfolio. They can have the same drawdowns as other stocks, but, if you pick the right ones, they will continue churning out dividends to help set a floor on your short-term pain. The three Real Estate Investment Trusts (REITs) that we’ll discuss, Iron Mountain (IRM 0.92%), Blackstone Mortgage Trust (BXMT 1.52%), and Macerich Co (MAC 1.48%) all have strong dividend yields over 5% and could be the new backbone of your portfolio.

Iron Mountain

Iron Mountain is a combo REIT. For years it specialized in storing high price specialty goods like art and other records that needed to be kept secure. That analog business is still chugging along and produced about $1.5 billion of revenue through June 2022 , 5% more than it did through the same period of 2021. The exciting part is the datacenter business.

The REIT adapted its expertise in storing sensitive files and business information to digital data centers. That side of the business generated $1 billion in revenue YTD, up from just $775 million in 2021. That’s growth of 33%. Pretty soon, the new digital business will take over the close to 70-year-old analog business.

Altogether, Iron Mountain had $1.83 per share in Adjusted Funds From Operation (AFFO), which is a REIT specific cash flow measure. Management estimates that full-year 2022 AFFO per share will be between $3.70 and $3.80. That puts the multiple around 13, with the current price around $49 per share . Digital Realty, a data center competitor, trades for about 19 times its AFFO.

Even better, the dividend yield is 5.12%. That means you get the certainty of the analog storage business, the growth prospects of the data center business, and 5% back in cash every year.

Blackstone Mortgage Trust

Blackstone Mortgage Trust is a mortgage REIT. Unlike other REITs, mortgage REITs don’t own real estate and lease it out. Typically, they borrow money with short-term debt and use it to buy mortgages or mortgage backed securities (MBS) that have longer terms. Because of the difference in terms and the different in credit rating, the mortgages pay higher than the short-term debt costs and the REIT makes money on the spread.

In good times, mortgage REITs are able to borrow money non-stop at low rates, buy up mortgages with enough diversification to not worry about default risk, and then pay huge dividends to shareholders. It’s not unusual for a mortgage REIT to have a dividend yield over 10%. Blackstone Mortgage’s is on the low end and it’s 8.12%.

The problem is when interest rates go up. Mortgage REITs can get stuck having to roll debt over to higher and higher rates and eventually the new short-term debt costs more than the mortgages they bought years ago are paying out.

Part of the reason Blackstone Mortgage has a higher dividend yield than its peers is the types of mortgages that it buys. Blackstone Mortgage is buying corporate debt with floating rates. That means when interest rates go up its revenue does as well. You can sit back and collect over 8% a year without worrying (as much) about interest rate risk.

Macerich

Macerich owns and operates regional malls. It isn’t the type of business I would normally get excited about—malls don’t exactly bring to mind visions of growth and modernity—but it has a 5.9% dividend yield and trade for just 75% of its book value, so, why not look into it.

Turns out, Macerich specializes in class A malls, wat it calls “town centers” that are located in major urban and suburban areas. The REIT doesn’t really own the malls where you’d go to a department store and buy your dad a tie for father’s day, it owns huge outdoor shopping centers that also have gyms, hotels, expensive restaurants, and other amenities around. Think more Las Vegas shopping than Springfield Illinois shopping.

The strategy is working well so far. 900,000 SF of new stores were opened in 2021 and 2 million SF of new stores signed lease contracts to open over the next three years. Debt is down $1.7 billion from 2020. And the REIT is strategically disposing of the class B (Springfield types) malls; it raised $470 million in 2021 selling these malls, has raised $2.2 billion since 2013, and has over $100 million more expected.

Macerich’s valuation multiples are low and dividend yield is high because investors see mall (like I initially did) and think “dead business,” if it is able to keep churning out cash flows with its new strategy, it will make the investors who dig a little deeper pretty happy.