In This Article:
Key Points
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Rexford Industrial has a historically high yield and a still-strong business.
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Realty Income is one of the most diversified REITs you can buy, and it has an above-average yield.
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Toronto-Dominion Bank is muddling through hard times, offering a high yield, and still has a strong foundation.
If you have $2,000 today, you need to think carefully about which dividend stocks you want to buy. After all, the market is still near all-time highs, and valuations seem stretched throughout Wall Street. The smartest places to look right now are probably the areas where others aren't looking. This contrarian approach will lead you to stocks like Rexford Industrial (NYSE: REXR), Realty Income (NYSE: O), and Toronto-Dominion Bank (NYSE: TD). Here's a look at why each one is an attractive income option today.
1. Rexford Industrial is hyperfocused
The concern around Rexford can be summed up in one word: tariffs. This is because the real estate investment trust (REIT) is focused on industrial assets like warehouses in Southern California. That's an unusually tight focus in the REIT sector and one that places Rexford at great risk if the current tariff upheaval leads to a material decline in imports from Asia. This is why the REIT has a yield of 5% versus the average REIT yield of 4.1%.
Sure, there will be some short-term turbulence, but it seems highly likely that global trade will adjust to whatever changes are made on the tariff front. And then Rexford will appear well positioned again and likely afforded a higher valuation. In the meantime, however, the REIT will do what it has always done, growing via acquisitions and redevelopment. It is worth noting that Rexford has managed to grow its dividend at a compound annual rate of around 10% over the past decade. The most recent increase was a bit below 10%, but still much faster than most REITs. If you are a dividend growth investor, the current market concern about its regional and property focus is an opportunity to buy Rexford while its yield is near all-time highs.
2. Realty Income is a boring tortoise and has an attractive yield
Realty Income's dividend yield is 5.8% and backed by a 30-year streak of annual dividend increases. The problem is that this REIT is a bit of a snore, with dividend growth averaging around 4% a year over that three-decade span. It's not exactly something you'd brag about at a cocktail party.
But don't overlook Realty Income; it is financially strong, and incredibly reliable. It is also one of the largest REITs you can buy and one of the most diversified, with retail and industrial assets spread across North America and Europe. The business is built on the net lease model, in which Realty Income often buys properties directly from companies that immediately lease them back (and pay for most property-level operating expenses). It is more of a financing transaction for the seller than anything else, allowing them to raise cash while retaining effective control of a vital asset.