If you are looking to generate some income and have as little as $500 to invest, you have options. Don’t let the tiny little 1.2% yield on offer from the S&P 500 index put you off. If you are a safety-first kind of investor, the 5.6% dividend yield from Realty Income(NYSE: O) will likely interest you. If you are willing to take on a bit more risk, then the rapid dividend growth of Rexford Industrial(NYSE: REXR) will probably be to your liking. Here’s a quick look at each of these high-yield stocks.
The big story behind Realty Income is the real estate investment trust’s (REIT’s) three-decade-long streak of annual dividend increases. Within that streak, the company has increased its dividend every single quarter for 110 quarters. As if that wasn’t enough, the dividend is paid monthly, so it is as close to a paycheck replacement (with regular quarterly raises) as you can get on Wall Street.
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Realty Income is the largest net lease REIT, with over 15,600 properties. Its portfolio is focused on retail assets, which are easy to buy, sell, and release. But it also has exposure to industrial properties and more unique one-off assets like vineyards and casinos. On top of the property-level diversification, it also invests in both North America and Europe, making it one of the most diversified REITs you can buy.
Given Realty Income’s size (it has a roughly $50 billion market cap), it is a slow and steady tortoise. But boring can be very attractive when it is attached to a 5.6% dividend yield. That’s well above the market and higher than the average REIT’s yield of roughly 4.1%. An investment of $500 will get you in the door with around eight shares of this reliable and high-yield dividend stalwart.
Rexford Industrial’s dividend yield is 4.6%. That’s above the REIT average, too, but the real story is that it is near the highest yield levels in Rexford’s history. Much younger than Realty Income, Rexford has “only” increased its dividend for 12 years. However, the dividend growth rate over the past decade was a huge 13% a year. More recent increases have been in the 8% range, but that’s still about twice the long-term dividend growth rate on offer from Realty Income. If you favor dividend growth over yield, Rexford will likely be a good choice for your portfolio.
Rexford, however, is a very specialized REIT. First, it is focused on industrial assets, so it lacks the property type diversification of Realty Income. But the really big specialty is that Rexford only invests in Southern California. That said, this region is a key trade gateway between Asia and the United States. It is also supply-constrained, which gives Rexford leverage when it sets rental rates. Rexford is one of the largest players in the region, which gives it an edge when it comes to buying assets and redeveloping them so it can charge higher rents. The tariff kerfuffle has investors worried right now, which is why the stock has fallen and the yield has risen. But given the interconnectedness of the world today, it seems likely that the tariff issue will abate in time.
If you don’t mind buying when others are selling, this high-yield and specialized REIT could be exactly what your dividend portfolio needs.
While $500 may not seem like a lot of money, it can get you started with reliable high-yield dividend stocks like Realty Income and Rexford Industrial. Although they are very different types of income investments, both have very attractive features that will interest long-term investors. If you buy a few shares today and keep adding to them over time, perhaps even dividend reinvesting, you can turn today’s $500 investment into a long-term income stream to support you when you hit retirement. And Wall Street’s long history suggests that the sooner you start, the better off you’ll be.
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Reuben Gregg Brewer has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.
