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3 REIT Dividend Raises You Can Still Take Advantage Of

The No. 1 reason many investors put their money in real estate investment trusts (REITs) is their dividends.

Because of this, it's worthwhile to do some monitoring now and again to catch the latest of the inevitable dividend raises from REITs. Sure enough, in the early weeks of 2022, three niche REITs declared increases to their distributions: UMH Properties (NYSE: UMH), Stag Industrial (NYSE: STAG), and Life Storage (NYSE: LSI).

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1. UMH Properties

In mid-January, UMH Properties a 5% dividend raise to $0.20 per share. At the time of this writing, this would equate to a dividend yield of 3.3%.

UMH operates in a niche that is experiencing excellent growth, as it specializes in the real estate that houses communities of relatively low-cost mobile homes. As of the date of its latest dividend raise, it directly owned and operated 127 such communities with over 24,000 developed homesites, located in 10 U.S. states.

In an environment of persistently high demand for homes, UMH as a budgget option has done rather well lately, with some notable pops in fundamentals. In the third quarter, for instance, its total income (read: revenue) rose a beefy 11% on a year-over-year basis. As it did, adjusted funds from operations (AFFO, the top profitability line item for REITS), shot 51% higher.

The wide difference in total income and AFFO growth was due to numerous positive factors, including higher occupancy and rent increases (made possible by that continued robust demand).

Operating in an attractive niche for a certain type of homeowner, in a still-vibrant economy, point to continued success for UMH. Another promising development is the REIT's incursion into a market that is a very good fit for its business: Florida. It's doing so through a joint venture it established with Nuveen Real Estate; this entity is buying an all-ages planned community in the state with 219 homes spread over roughly 39 acres.

2. Stag Industrial

Stag Industrial is another specialty REIT, belonging to the rather limited segment of industrial warehouse operators. It also belongs to another small stock market grouping -- companies that pay monthly dividends. The company's January dividend has been lifted by 0.7% to slightly over $0.12 per share. That brings the yield up slightly, to 3.5%.

If warehouse landlording sounds rather plain and pedestrian, consider how hot that type of property is at the moment. After all, these spaces are in high and sustainable demand for we'll-get-it-to-you-fast delivery retailers like Amazon -- Stag's No. 1 tenant, by the way.

Meanwhile, Stag has been feverishly busy expanding its portfolio through new acquisitions. It's little wonder -- at the end of Q3, its occupancy rate was nearly 96%. In said quarter it acquired 24 new properties located in 10 states spread across the country, while divesting eight facilities. That net addition of 16 properties was well more than the nine combined in Q1 and Q2.

The more warehouses Stag operates, the more it makes. In Q3, it managed to grow its revenue by 21% year over year and improve its AFFO by 25%.

Retailers these days are falling over themselves to get stuff to your front door as soon as possible -- especially now that contactless delivery is part of our lives thanks to the coronavirus pandemic. This augurs well for Stag's future, as it's right in the middle of the warehousing trend. Plus, it's operating in a still-thriving economy, which is always a fertile environment for warehouses and other business facilities.

3. Life Storage

Completing our trio of atypical REITs, we have self-storage operator Life Storage. Life is fine for Life Storage these days, as the REIT just declared a beefy 16% dividend raise. Its new quarterly payout will be $1.00 per share, shaking out to a yield of just under 3%.

As with fellow specialists UMH and Stag, Life Storage is a serious player in its respective segment. As of mid-January, it operated over 1,000 facilities in 35 U.S. states, servicing a total customer base that topped 600,000 individuals.

Americans are the world's ultimate consumers; they tend to accumulate a lot of stuff in their lives. It needs to go somewhere, and that need is pushing up demand for operators like Life Storage.

Consequently, Life Storage has lately been breaking records in terms of occupancy. That was a big reason the 531 storage buildings it's owned fully since December 2019 collectively recorded a 17% year-over-year revenue increase in the REIT's Q3.

Since same-store operating costs ticked up less than 4%, that juiced profitability -- AFFO leapt 51% higher to nearly $109 million, or $1.37 per share.

Like its thriving peers, Life Storage is on a busy asset acquisition spree, adding 29 properties during the quarter alone, and being under contract for another 33.

The combination of strong demand and a wider footprint has pumped up expectations; the company significantly raised its AFFO guidance for full-year 2021 to $4.92 to $4.96 per share, well up from the previous $4.69 to $4.79. We can expect a commensurate dividend raise before long in the likely case that Life Storage continues along this growth path.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns and recommends Amazon and Stag Industrial. The Motley Fool recommends Life Storage Inc and UMH Properties. The Motley Fool has a disclosure policy.


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