Here Are My Top 3 High-Yield Stocks to Buy Now

Key Points

• Realty Income is a giant net lease REIT with a global footprint and an incredible dividend track record.

• W.P. Carey cut its payouts in the recent past, but long-term income investors should still be giving the industrial-focused REIT serious consideration.

• Rexford Industrial is hyper-focused geographically and by property type, which could make it a huge opportunity for more aggressive investors.

• 10 stocks we like better than Realty Income ›

The S&P 500 (SNPINDEX: ^GSPC) index offers investors a tiny 1.2% dividend yield today. By contrast, the average real estate investment trust (REIT) has a yield of 3.7%. But if you buy Realty Income (NYSE: O), W.P. Carey (NYSE: WPC), or Rexford Industrial (NYSE: REXR), you can get yields between 4.1% and 5.4%. Here's why each of these three high-yield stocks is worth buying now.

1. Realty Income is the safe income choice

At its current share price, Realty Income's dividend has a 5.4% yield. The REIT also has a three-decade streak of rewarding investors with annual dividend increases. Those payouts are supported by a diversified portfolio of retail and industrial properties in the U.S. and Europe, and an investment-grade-rated balance sheet. If you are a conservative income investor, you will probably find Realty Income very compelling.

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However, there's one small, but notable, problem with this REIT. With a $54 billion market cap, it is, by far, the largest net lease landlord (net lease terms require tenants to pay most property operating costs). It owns more than 15,600 properties, most of them retail sites. This size gives it some advantages over its peers (such as easier access to capital markets and the ability to take on large deals). But it also means it's a slow-growth business because it takes enormous amounts of new investments to meaningfully expand its top and bottom lines. However, if you are a conservative investor, Realty Income is still a top high-yield stock to buy right now.

Image source: Getty Images.

2. W.P. Carey has more growth appeal

There is one notable black mark on W.P. Carey's dividend track record: It cut its dividend at the end of 2023. That move came after 24 consecutive years of dividend increases. But it wasn't a decision made out of weakness. It was a strategic choice. W.P. Carey basically decided to exit the troubled office sector in one quick move, which shrank its portfolio meaningfully and required a dividend reset. Management started to boost payouts again the very next quarter, and has continued to increase them in each quarter since. That's the same quarterly increase cadence it followed before the cut. So the lofty dividend yield of 5.4% on offer at its current share price should still be on most dividend investors' radar screens.

The reason to choose W.P. Carey over Realty Income is growth potential. W.P. Carey is the No. 2 net lease REIT and boasts a market cap of nearly $15 billion. It owns roughly 1,600 properties, with a heavier focus on industrial assets while Realty Income favors retail properties. Given W.P. Carey's smaller size, it doesn't require as much investment to meaningfully expand the business.

The highlight here is the REIT's most recent dividend increase, which brought the payout to 4% above what it was a year ago. Realty Income's last dividend was roughly 2.3% above its year-earlier level. For reference, both of these REITs tend to increase their dividends on a quarterly basis, so this is a true apples-to-apples comparison. If you like Realty Income's yield, but appreciate the promise of faster dividend growth, W.P. Carey should probably be your pick.

3. Rexford could increase its dividend even faster

At its current share price, Rexford Industrial has a roughly 4.1% yield. That's lower than either of the two REITs above, but Rexford's average annualized dividend growth rate is much, much faster. During the past decade, management has increased its payout at an annualized pace of roughly 13%. That, however, isn't likely to be the average rate in the future -- its more-recent hikes were lower than that. However, this industrial-focused REIT was able to increase its rents on expiring leases by a huge 20% or so. So there is material growth built into Rexford's future.

The problems with this REIT are that it only owns industrial assets, and that all of its roughly 420 properties are located in Southern California, the gateway to the U.S. market for Asian goods. Given President Donald Trump's tariffs and trade wars, this is an uncertain time for Rexford, and investors reacted to it by selling off the stock. However, the stock's yield is near historic highs, so you might want to take the contrarian view here. Southern California's industrial property market is supply constrained and tends to have relatively high occupancy rates compared to other regions of the country. For more aggressive investors, and those who favor dividend growth over high yields, Rexford might be the best of the bunch here.

Plenty of high-yield choices in today's low-yield market

Just because the broad market isn't offering income investors attractive yields on average doesn't mean you can't find them. You just need to dig a little. Among these high-yield investments, Realty Income is the best option for risk-averse investors. W.P. Carey is a good choice for contrarians who think long-term (and who can forgive its recent payout reduction). And Rexford will probably be most appealing to those who favor more growth-oriented investments.

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Reuben Gregg Brewer has positions in Realty Income and W.P. Carey. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.