Real estate investment trusts (REITs) can be very enriching investments, especially over the long term. REITs have historically outperformed stocks over periods of more than 20 years. A big driver of those above-average returns is their growing dividends.
Several REITs stand out for enriching returns over the past two decades:
AMT Total Return Level data by YCharts
To look at those returns through a different lens, these REITs have grown a $10,000 investment made 20 years ago into between $162,580 and $324,090, assuming dividend reinvestment. Here's a closer look at some factors driving their ability to enrich their investors.
Towering returns
SBA Communications (SBAC -0.39%) is an infrastructure REIT focused on communications infrastructure, like cell towers. The company has grown rapidly by developing and acquiring communications infrastructure across North and South America, Africa, and Asia. It has capitalized on the increasing need for communications infrastructure worldwide, which has opened the door to many high-return investment opportunities. The company's growing portfolio of communications infrastructure generates lots of cash thanks to its industry-leading margins. It has a balanced approach to allocating that cash, using some money to expand its portfolio, repurchase shares, repay debt, and pay dividends. The REIT has grown its payout by nearly 165% since it initiated a dividend following its conversion to a REIT in 2016. With more growth ahead because of the rising need for communications infrastructure, this REIT could continue to produce towering returns.
Data-driven growth
Equinix (EQIX -0.60%) is a leading data center REIT. The company has capitalized on the digitalization megatrend, which is driving the need for more data centers to support a series of tech-driven catalysts over the years, including the expansion of the web, social media, software-as-a-service, cloud computing, and AI. Equinix has capitalized on these trends by acquiring other data center platforms worldwide and building additional data centers. That has enabled the REIT to deliver very steady growth over the years; its revenue has increased for 86 straight quarters. Equinix has also delivered very steady dividend growth, increasing its payment every year since converting to a REIT in 2015. Equinix has tremendous future growth potential, given the growing need for data centers to support cloud computing and AI applications. It could therefore continue to produce robust total returns in the future.
Extra-large returns
Extra Space Storage (EXR -1.01%) has grown into the largest self-storage REIT in the U.S., with a 13.9% share of the highly fragmented market. A big driver of its outsize returns has been the growth of its leading third-party management platform, which it launched in 2008. The company earns fees and other income by managing properties for other self-storage property owners. The business requires minimal capital, which allows the REIT to grow its revenue at an above-average rate. Extra Space has also expanded by acquiring other large self-storage platforms, including a $15 billion deal to buy Life Storage last year. It also started a bridge loan program in 2019, which has enabled it to originate over $2.2 billion of loans that have supplied it with income and new investment opportunities. The company's fast-rising income has supported robust dividend growth of over 1,360% during the past 20 years.
Towering dividend growth
American Tower (AMT -0.27%) is an infrastructure REIT focused on towers and data centers. The REIT started out focusing on building and buying cell towers in America. It has since expanded to many global markets to enhance and extend its growth potential. In addition, it added a U.S. data center platform a few years ago to further bolster its growth runway.
American Tower's growing portfolio has helped drive robust growth, with double-digit compound annual revenue, earnings, and cash flow growth since it converted to a REIT in 2013. Its strong financial growth has enabled the REIT to grow its dividend at around a 20% compound annual rate during that timeframe. With multiple growth drivers, the REIT is in an excellent position to continue growing its dividend and total shareholder returns at a solid rate in the future.
Very healthy returns
Omega Healthcare (OHI -1.13%) is a healthcare REIT focused on investing in skilled nursing and assisted living facilities across the U.S. and U.K. It leases these properties to operators under long-term net leases that supply stable rental income. It also provides healthcare companies with loans and other financing options to generate additional revenue.
Omega has steadily grown over the years by investing in new skilled nursing and assisted living facilities. These investments grow its income, which enables the REIT to pay a very high-yielding dividend that has grown modestly over the years. The combination of income and steady growth has enabled this REIT to produce very healthy total returns over the long term.
Magnificent wealth-building dividend stocks
REITs have historically been exceptional long-term investments. They steadily expand their real estate portfolios, which helps grow their earnings. That earnings growth drives the stock price and dividend higher over the long term. Those features make REITs great stocks to buy and hold for the long haul.
