3 Apartment REITs Offering Yields Up To 4.2% And Dividend Growth

The residential real estate market in the United States is more unaffordable than ever, pushing more people to rent rather than buy and making residential real estate investment trusts (REITs) very attractive for long-term investors and those seeking dividend income.

Residential REITs, like those that own apartments, offer investors the benefits of owning rental properties without the hassles of being a landlord or the large upfront expense of acquiring a property. Like all REITs, residential REITs must legally distribute a significant portion of their taxable income to shareholders as dividends.

If you're interested in investing in apartment REITs, here are three you should consider.

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AvalonBay Communities

As of June 30, AvalonBay Communities AVB owned or had ownership interests in 300 apartment communities containing approximately 91,399 apartment homes in 12 states and the District of Columbia. Some of its largest markets include Boston, Charlotte, Denver, New York City, San Francisco, Seattle, and Washington, D.C.

AvalonBay currently pays a quarterly dividend of $1.70 per share, which equates to an annualized dividend of $6.80 per share and gives its stock a yield of about 3.2% at the time of this writing.

In addition to offering a high yield, AvalonBay is a solid source of dividend growth. It has raised its dividend 11 times in the last 13 years, including twice in the last two years. Its latest increase was a 3% hike in January.

NexPoint Residential Trust

As of June 30, NexPoint Residential Trust NXRT owned and managed a portfolio of 36 apartment communities containing 13,174 units across 11 markets in seven Southeastern and Southwestern U.S. states. Its largest markets include South Florida, Dallas-Fort Worth, Atlanta, Nashville, and Orlando.

NexPoint currently pays a quarterly dividend of $0.4625 per share, equating to an annualized dividend of about $1.85 per share and giving its stock a yield of about 4.2% at the time of this writing.

NexPoint also has an active streak of annual dividend increases. It has raised its dividend each of the last eight years, and its 10.1% hike in October has it on track for 2024 to mark the ninth consecutive year with an increase. 

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UDR

As of June 30, UDR UDR owned or had ownership interests in 187 apartment communities containing approximately 60,126 apartment homes. Its communities are located in major U.S. real estate markets, including Boston, Dallas, Denver, New York City, Orlando, Philadelphia, San Francisco, Seattle and Washington, D.C.

UDR currently pays a quarterly dividend of $0.425 per share, equating to an annualized rate of $1.70. This gives its stock a yield of about 4.1%.

Like NexPoint, UDR has an active streak of annual dividend increases, but its streak is even more impressive. UDR has raised its annual dividend payment for 14 consecutive years, and its 1.2% hike in February has it on track for 2024 to mark the 15th consecutive year with an increase.

Better Yields Than Some REITs?

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through REITs.

Arrived Homes, the Jeff Bezos-backed investment platform has launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. It paid 8.1% in July. The best part? Unlike other private credit funds, this one has a minimum investment of only $100. 

As long-term rates go down and short-term rates stay high, there’s a unique chance to invest in fix & flip loans before yields drop. Check out Benzinga's favorite high-yield offerings. 

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