The need for an ever-increasing amount of data storage is a growth story that appears to have a very long runway. Experts estimate that the “digital universe” will double every two years (that’s a 50-fold increase in a decade). Enterprise IT, cloud computing and services, and the Internet of Things all require larger and larger amounts of data storage capacity. Data center owning real estate investment trusts (REITs) are a conservative way to play this trend, with potential for high teens, up to 20% annual total returns.

Related: 3 Cloud Computing Companies Racing to Push Cloud Computing Aside

There is a small handful of REITs that specialize in developing and leasing data centers. All of these companies are in a growth mode and are either acquiring and/or developing new facilities to lease out to a wide range of customers. The investing public often forgets that this REIT sector is an integral part of the technology industry. Often, they are treated like any other class of REIT. This dichotomy of market focus allows the smart investor to pick up data center REIT shares when the REIT sector at large goes into a decline. Multi-year investment returns from the data center companies will be driven by cash flow and dividend growth rates.

Let’s take a look at three REITs that can put high-teens annual compounding total returns into your portfolio.

Equinix, Inc. (Nasdaq: EQIX) is the $32 billion market cap, 800 lb. gorilla of the data center industry. The company converted from corporate tax payer to REIT status at the start of 2015. The company is a colocation and interconnection service provider. Colocation is a data center facility in which a business can rent space for servers and other computing hardware. Typically, a colocation facility provides the building, cooling, power, bandwidth and physical security while the customer provides servers and storage.

The company’s services currently give 9,800 customers 280,000 interconnects between data centers and world’s digital exchanges. According to the current Investor Overview presentation, Equinix owns 190 data centers in 24 countries, on five continents.

This is truly an international company. Over the last decade the company has produced 26% and 29% compounding annual revenue and EBITDA growth. This results in mid-teen per share cash flow growth. For 2018 the company forecasts 14% FFO per share and dividend increases. The shares currently yield 2.2%.

Digital Realty Trust, Inc. (NYSE: DLR) is a $20 billion market cap REIT that owns 205 data centers in 12 countries. Digital Realty has 2,300 customers. Digital Realty is also a colocation and interconnection services provider.

This REIT’s customer list includes some of the largest technology and telecommunications companies. In the top 10 are IBM, Oracle, Verizon, Linked In, and even Equinix.

According to the current investor presentation, Digital Realty has grown FFO per share for 12 straight years. Over that period cash flow to pay dividends has grown by a compounding 12.3% per year. This chart shows the FFO growth compared to large REITs in other sectors:

The DLR dividend has grown by 10% plus per year for the last decade. Management forecasts a 9% increase in 2018. The shares currently yield 4.0%.

CoreSite Realty Corp (NYSE: COR) is a $3.6 billion market cap REIT that owns 20 data centers in eight strategic U.S. cities. The company’s focus is to provide colocation services to enterprise, network, and cloud services companies. Here is a graphic of the larger (out of 1200) customers:

CoreSite is the high growth, higher risk company out of the three covered here. Since 2011, FFO per share has grown by 23% compounded and the dividend by more than 30% per year. Future results will cycle from relatively flat to high growth years.

An investment in COR will not be as stable as with the large cap data center REITs. The flip side is the potential for large dividend increases and corresponding share price gains. The shares currently yield 3.7%.

“First-level” investors – those who buy and sell on headlines – mistakenly believe that real estate investment trust (REIT) profits will suffer if rates continue to rise. They’re wrong. This is actually an ideal time to buy the strongest names in the sector.

Note that I said strongest. The sector’s popular proxy is something you should avoid, despite its popularity. I’ll call it out in a moment.

Overall, rising rates are actually good for the best REITs because it signals a rolling economy. These landlords have no problem raising their rents when their tenants are making money.

Unfortunately, the business world is increasingly becoming a neighborhood of “haves” and “have nots.” And some REITs are not doing well, despite the broader tailwinds.

Take the Vanguard REIT ETF (VNQ), which is now paying its highest current yield  since 2009. Buy the dip? No way. Its annual payout actually declined in 2017 year-over-year!

VNQ’s Disappearing Dividend

Source: Contrarian Outlook

One year of Amazon-powered disruption, and VNQ’s dividends are back to their 2013 levels. Yikes.

But VNQ is, of course, a flawed index. It’s “low cost” – but so what? Investors who buy it are getting what they pay for.

A better idea is to cherry pick the firms who do have booming businesses that are not being eaten alive by Jeff Bezos & Co. Here are seven landlords who own their respective property niches. These stocks pay up to 8%. All have dividend upside to boot.

American Tower (AMT)
Dividend Yield: 1.8%

American Tower (AMT) may have one of the smallest yields in the REIT space, but it also has one of the most impressive dividend growth streaks in the entire real estate sector.

Namely, AMT has increased its quarterly payout for 25 consecutive quarters.

Not years. Quarters.

American Tower is at the attractive crossroads of technology and real estate, owning and operating wireless and broadcast towers, as well as other telecommunications infrastructure, in the U.S. and abroad. In short, it helps companies such as Verizon (VZ) and AT&T (T) connect tens of millions of Americans with voice and internet service.

But unlike Verizon and AT&T, American Tower is very much a growth story. The company’s revenues and funds from operations (FFO) have been consistently climbing for years, and 2017 saw another blowout performance from this telecom REIT. The top line exploded by 15.2% to $6.7 billion, while consolidated adjusted FFO jumped 16.5% to $2.9 billion. That allowed the company to grow its dividend by nearly 20% across four separate increases.

And with deals such as an agreement with Vodafone (VOD) and Idea Cellular to widen its exposure in India by roughly a third, that growth path should continue.

American Tower (AMT) Keeps Building a Fundamental Bull Case

Alexandria Real Estate Equities (ARE)
Dividend Yield: 2.8%

Alexandria Real Estate Equities (ARE) is one of the most niche but intriguing office REITs on the market. This company focuses on life sciences real estate, specifically focusing its efforts on industry business clusters.

It owns a portfolio of 213 properties across North America totaling 29.6 million square feet, clustered in seven major regions: Seattle, San Francisco, San Diego, Greater Boston, New York City, Maryland and Research Triangle Park in North Carolina.

Like American Tower, Alexandria Real Estate is sitting on a growth geyser, with the company building its top line by 22.4% to $1.1 billion in 2017. Same-property net operating income grew 3.1% year-over-year, and FFO shot up 31.6% to $554.5 million.

Better still, the company has grown its payout for years, sometimes multiple times within the same year, including a 7% bump across two hikes in 2017. And the below chart shows exactly what you should expect – that is, dividend growth being rewarded by share-price growth almost identically over time.

As Alexandria Real Estate’s (ARE) Dividend Goes, So Go Its Shares

Regency Centers (REG)
Dividend Yield: 3.6%

Regency Centers (REG) prides itself as being “The Leading National Shopping Center REIT.” Uh oh.

But Regency has some angles that may help buffer it from Amazon.

Regency’s portfolio consists of 426 properties encompassing 59 million square feet. As of the company’s fourth-quarter 2017 investor presentation, some 96.3% of the properties were leased, with 80% of properties anchored by a grocery store. And REG boasts an average of “138,000 people and $110,000 average incomes in Gateway, 18+ Hour and select growth markets.”

Grocery stores do provide much-needed foot traffic to shopping centers, and Regency’s grocery sales in specific are significantly better than its peers. That hasn’t stopped Wall Street from selling Regency off alongside the narrative. Shares have been hammered by about 30% since mid-2016, roughly doubling the losses of the VNQ.

But Regency is making smart moves, including clipping away at its interest costs via changes to its unsecured revolving credit facility, and it continues to get cheaper by the day, now trading at about 19 times FFO. That’s not exactly cheap for a company that ultimately still plays in the troubled retail space, but REG might be one of the best of a bad breed. Also heartening is a small stretch of consecutive dividend improvements starting in 2014.

Summit Hotel Properties (INN)
Dividend Yield: 5.1%

Summit Hotel Properties (INN), like Regency, has received more than its share of losses, getting knocked down by more than 30% since summer 2017. And also like Regency, Summit is starting to look increasingly appealing as its price is whittled away.

Summit is one of several plays that center around the growing trend of the “experience economy,” in which Americans (especially Millennials) are increasingly valuing experiences such as travel over “stuff.” And importantly, Summit is a play on the wealthier individuals within this economy.

INN owns 83 hotels under the Marriott (MAR), Hilton (HLT) and InterContinental Hotels (IHG) brands, as well as under a Hyatt Hotels (H) affiliate. The portfolio spans 26 states, with 89% located in the top 50 metropolitan statistical areas; 96% is within the top 100. The company is rapidly upgrading its portfolio, too, including a $163 million, five-hotel acquisition from Xenia Hotels & Resorts (XHR) in June 2017, and a $164 million, four-hotel buyout in November of last year spanning Yale, Boston, Cleveland and Tuscon.

While several hotel REITs struggled in 2017, Summit put up an 8.4% improvement in its adjusted FFO for the full 12 months. That served as a springboard for another increase to the quarterly dividend – its fourth since 2016, when it began improving its payout after years of stagnation.

That payout is easily covered, too, at just 54% of its FFO. And shares are cheap, trading for just 10 times FFO.

Summit Hotel Properties (INN) Is a High-Rent Value

One Liberty Properties (OLP)
Dividend Yield: 8.0%

One Liberty Properties (OLP) is a diversified small-cap net-lease REIT that’s primarily retail in nature, but also features a significant chunk of industrial real estate. Its 118 properties across 30 states include name-brand tenants such as FedEx (FDX), Haverty Furniture (HVT), Whole Foods, Walgreens (WBA) and Wendy’s (WEN), not to mention numerous industrial operators that are less familiar to consumers.

Tenant concentration is a little on the high side, with the top five composing more than a fifth of One Liberty’s contractual rental income, but there’s little concentration risk. The same can be said about geography, with Texas the top state holding at 12% of the portfolio.

Again, retail is problematic at present, but many of OLP’s individual tenants aren’t at as much risk from the likes of Amazon as many mall retailers. And operationally speaking, One Liberty has been solid for years, with 2017 serving as no exception. Rental income improved by 6.2% to $68.2 million, and adjusted funds from operations grew 5% to $2.09 per share.

Moreover, the dividend has been increased for a sixth consecutive year, and unlike many other REITs whose yields have been driven higher by large declines, OLP isn’t prone to big swings – in either direction.

OLP provides strong total returns thanks to its massive 8% dividend, but Wall Street has stubbornly refused for years to recognize One Liberty’s business success.

2 Recession-Proof Dividend Growth REITs: 7.5%+ Yields and 25% Upside

My favorite commercial real estate lender lets us play Monopoly from the convenience of our brokerage accounts. They do all the legwork, building a secure, diversified loan portfolio featuring offices, retail space, hotels and multifamily units.

Management then collects the monthly payments, deposits the checks

– and then it sends most of the profits our way as dividends (a requirement of its REIT status).

The stock’s current dividend (a 7.7% yield today) is covered by earnings-per-share (EPS) today. And don’t be fooled by the stagnant dividend (not that stability is bad). The firm continues to originate an increasing number of loans:

37% Loan Growth Today Tees Up Dividend Growth Tomorrow

This firm is a conservative lender with perfect loan performance (100%). Its growing portfolio will drive higher profits, which in turn will inspire the next dividend hike. The best time to buy the stock is right now, as it makes the investments which will drive its payout and share price higher from here.

Plus this firm has also smartly eliminated interest rate risk because it uses floating rates. In fact, it’s actually set up to make more money as interest rates move higher:

More Income as Interest Rates Rise

Same for another REIT favorite of mine, a 7.5% payer backed by an unstoppable demographic trend that will deliver growing dividends for the next 30 years. Interest rates are no problem for this landlord because it will simply continue raising the rents on its “must have” facilities.

Its founder Ed Aldag admitted that, fourteen years ago, he had “zero assets, a dream, and a business plan.”

Well his dream and plan were plenty – Ed parlayed them into $6.7+ billion in assets!

And right now is the best time yet to “bet on Ed” because his growing base of assets is generating higher and higher cash flows, powering an accelerating dividend:

I love dividend increases because they are proof that management is actually making more money, so can afford to pay us shareholders more. And an accelerating payout is a flat out cry for help!

Any management team that raises its dividend faster and faster is clearly making more money than it knows what to do with. This usually happens when it achieves a tipping point where its machine no longer requires as much reinvestment to continue growing. So leadership says: “Please, take a bigger raise, shareholders.”

Meanwhile investors and money managers who spot dividend accelerators lose their minds because, in theory, there is no valuation too high for a company that is increasing its dividend at an accelerating rate. Their spreadsheets literally break, and they buy the stock in a frenzy.

Ed’s stock should be owned by any serious dividend investor for three simple reasons:

1. It’s recession-proof.
2. It yields a fat (and secure) 7.5%.
3. Its dividend increases are actually accelerating.

These two REITs are both “best buys” in my 8% No Withdrawal Portfolio – an 8% dividend paying portfolio that lets retirees live on secure payouts alone. And they can even enjoy price upside to boot, thanks to the bargain prices they’re buying at.

Please don't make this huge dividend mistake... If you are currently investing in dividend stocks – or even if you think you MIGHT invest in any dividend stocks over the next several months – then please take a few minutes to read this urgent new report. Not only could it prevent you from making a huge mistake related to income investing, it could also help you earn 12% a year from here on out! Click here to get the full story right away. 

Source: Contrarian Outlook 

The last six weeks have shown that trying to guess the direction of share prices is a tough way to make money in the stock market. The previous two years made it look easy to generate great profits in the market. The reality is that the stock market is much more likely to be like the last two months. If you are a long-term investor with the goal of building wealth and income to support a comfortable future, you need a plan that is not based on guessing and chasing stock prices.

Income and total return focused investors have a powerful mathematical tool that few realize exists. The math is what happens between stock yield and dividend growth. Here is how it works. If a company increases its dividend, for the stock yield to stay the same, the share price must increase by the same percentage as the percentage increase of the dividend boost. Let me demonstrate with an example.

A stock yields 5% and the dividend is increased by 5%. The new yield is then 5.25%. For the stock to stay at a 5% yield, the share price must move up by the same 5%. The result is a 5% dividend income plus a 5% share price gain for a 10% total return. In the short to intermediate term, this share price to dividend growth relationship is not apparent. Too many short term “news” items pull share prices in this direction and that. Over the long term, history shows that the average annual total returns from quality dividend growth stocks end up very close to the average yield plus the average dividend growth rate.

The relationship works through market corrections and bear markets. The dividend paying stock prices will go down with the rest of the market, but the subsequent recovery will see stock price gains sufficient to bring the relationship back to expectations. An investor can boost the mathematical total return with dividend reinvestment.

The real estate investment trust (REIT) sector is a good place to find stocks with attractive yields and companies that increase dividends every year. I maintain a REIT sector database to track yields and annual dividend increases. I use the database to screen the REIT world for a range of income focused investment strategies.

Here are five stocks that score well on the total return potential of current yield plus dividend growth. The dividend growth rate is for the last 12 months, so as an investor your task is to review each company’s results and make your own analysis whether dividend growth will continue at the same pace, accelerate or slow down.

American Tower Corp (NYSE: AMT) is a large-cap REIT that develops and owns multi-tenant telecommunications real estate – cell phone towers. Over the last 12 months the company has increased its dividend by 20.7% with a dividend hike every quarter. Add the dividend growth rate to AMT’s 2.0% yield and you get 22.7% annual total return potential.

The recent dividend growth is not a fluke. Over the last five years, the company has grown the dividend by an average of 23% per year. The current yield is slightly above the average of 1.78%. The higher yield indicates that AMT may be slightly undervalued based on its market sector and dividend growth.

Hudson Pacific Properties Inc(NYSE:HPP) is focused on acquiring, repositioning, developing and operating office and media and entertainment properties throughout Northern and Southern California and the Pacific Northwest.

The company increased its dividend by 25% over the last 12 months. This continues the company’s record of low to mid-20% dividend growth for the last three years.

The current dividend is just 50% of FFO per share, which gives plenty of room for future dividend increases. HPP yields 3.15%, which is almost 1% above the company’s four-year average yield. This stock has strong potential for 20% plus total annual returns.

CoreSite Realty Corp (NYSE: COR) is one of the small number of data center REITs. The growth in data storage needs is truly on a parabolic trajectory. Data center REITs like CoreSite are experts at acquiring land, developing facilities appropriate for modern data storage server arrays, and providing high-speed Internet connections for companies leasing space in the data center facilities.

Over the last 12 months, CoreSite increased its dividend twice for a total increase of 22.5%. The tech sector needs for ever more data storage points to mid-teens or higher cash flow growth for the data center REITs for many years. COR currently yields 4.1%. Do the math on this stock’s return potential.

Related: 3 High-Yield and High Growth REITs for Value Investors

Equity Lifestyle Properties, Inc. (NYSE: ELS) is an owner and operator of lifestyle-oriented properties (properties) consisting primarily of manufactured home communities and recreational vehicle resorts and campgrounds. Equity Lifestyle owns high-end manufactured home communities located in popular retirement regions. This REIT has been a high dividend growth rate stock, growing the payout by 17% compounded per year over the last five years. The compounded growth results in dividends growing by 120% over the five-year period.

For the most recent 12 months, the ELS dividend has increased by 14.7%. The stock yields 2.27% compared to its four-year average of 2.33%. Remember for that yield to have stayed flat, the ELS share price appreciated by 15% per year.

Lamar Advertising Company (Nasdaq: LAMR) owns billboard, airport, and transit advertising assets. The company converted to REIT status at the beginning of 2014. At that point Lamar started to pay regular dividends with annual dividend growth of about 10%, including a 9.6% boost last year.

Compared to the stocks above, LAMR has a significantly higher yield at 5.0%. This REIT represents a different way to play the yield plus dividend growth equals total returns strategy. In the case of Lamar Advertising, the dividend growth rate is not as high, but the 5% yield is attractive cash return that can be used to compound share ownership.

Lodging is the commercial real estate sector that is most sensitive to the level of economic activity. Strong GDP growth usually leads to expanding profits for hotel owners. The lodging REITs have been in a slump since the sector’s recent bear market that lasted the full year of 2015.

In the spectrum of rent contract lengths, hotels have the shortest time. Room rates can change daily based on supply and demand conditions. When the economy starts to grow faster, there is greater demand for hotel rooms, which allows the lodging companies to fill more rooms at higher average prices.

The lodging real estate investment trusts (REITs) own portfolios of hotels. Most REITs focus on a specific sector of the hotel business. A REIT will own the properties and contract with third-party management companies. To keep it’s REIT status, the hotel owner cannot also be the operator. Lease contracts between the lodging REIT and the tenant/management company usually include a fixed lease payment and a percentage of revenues. The hotel REITs do experience greater revenue and free cash flow when hotel revenues are improving.

The metric to follow in this sector is RevPAR: revenue per available room. Quarter to quarter changes in RevPAR show you how well a specific REIT is doing. Flat or declining RevPAR means a flat dividend. If the metric starts to increase nicely, you can expect the REIT to start boosting the quarterly dividend. Most lodging REITs keep the dividend/FFO payout ratio low. This avoids the need to cut the dividend if there is slowing in the lodging space.

The hotel REITs had a tremendous run-up from the bear market bottom in 2009 until the sector peaked in January 2015. Investors saw rising dividends and share price gains of several hundred percent. When the RevPAR growth flattened, the hotel REITs went into a yearlong bear market covering 2015. For the last two years both RevPAR growth and hotel REIT share prices have been flat. Here is the five-year comparison chart of three hotel REITs that nicely illustrate the up, down and flat trends of the past half-decade.

With the U.S. economy hitting 3% GDP growth for several quarters in a row, investors are once again getting interested in the hotel REITs. Share values have risen nicely over the last five months, but be assured this is likely just the start of a run that could see share prices double or better. You should see RevPAR increasing and dividend increase announcements. Here are three lodging REITs that are well positioned to benefit from the stronger economic growth.

Host Hotels and Resorts Inc. (NYSE: HST) is the largest lodging REITs with a $15 billion market cap. The company owns a diversified portfolio of 89 premium hotels with over 50,000 rooms. These include upscale central business district locations, resort locations, and prime airport lodging facilities. Third party management contracts are with Marriott, Sheraton, Hyatt, Hilton and other premium hotel operators. For 2017, the company generated adjusted FFO of $1.65 per shares. Out of that dividends of $0.85 per share were paid. FFO per share was basically flat compared to 2016 and the dividend stayed level. Host Hotels did declare an additional $0.05 per share dividend in December.

Third quarter 2017 RevPAR was $176.87, down 1.5% from $179.63 for Q3 2016. These numbers are a good indication of how lodging revenues and profits have been very flat. A shift to increasing RevPAR will allow the company to grow the dividend and propel the share price higher. Full year 2017 results come out on February 22. HST currently yields 4.7%.

RLJ Lodging Trust (NYSE: RLJ) is a mid-cap, $4.1 billion market cap lodging REIT. The company is focused on acquiring premium-branded, focused-service and compact full-service hotels. RLJ Lodging Trust has a portfolio that consists of 157 properties with approximately 30,800 rooms. In September 2017, RLJ completed a merger with Felcor Lodging Trust, another mid-sized publicly traded REIT. For the 2017 third quarter, RevPAR declined 1.1% compared to a year earlier. This decline would have been 2.3% without the acquisition of the FelCor assets. FFO per share for the first nine months of 2017 was $1.84, handily covering the 40.99 per share of dividends paid. The merger will boost bottom line efficiency in 2018, setting the company up nicely for greater hotel demand this year and for the next few years. RLJ currently yields 5.6%.

LaSalle Hotel Properties (NYSE: LHO) is a $3.5 billion market cap REIT that owns hotels in 11 large urban markets and two resort hotels in Key West, FL. About 65% of the portfolio is managed by independent operators with the remaining third run by name brand hotel companies. The urban and resort focus allows LaSalle to generate high RevPAR rates, averaging $219 in the 2017 third quarter. RevPAR for that quarter was down 3.6% compared to a year earlier.

Last year was a tough year for competition in several of LaSalle’s target markets including Philadelphia and San Francisco. Those and the other urban hotel markets are the ones likely to benefit most from increased corporate travel spending associated with a growing economy and expanding corporate profits. LHO currently yields 5.9%.

Before the passage of the Tax Cuts and Jobs Act qualified dividends paid by corporations had a perceived tax advantage over fully taxable dividends paid by pass-through businesses like real estate investment trusts (REITs). The new tax law levels the tax playing field for REIT dividends, putting the advantage for investors even more in the camp of the higher yield real estate investment trusts.

Under the old tax rules, REIT investors paid their marginal tax rate on dividends from their REIT shares. For the highest income investors this meant a 39.6% top marginal tax bracket and the 3.8% Medicare surtax. In contrast, qualified dividends paid by regular corporations were subject to a maximum 20% income tax, plus the Medicare surtax. At a glance, REIT investors in the top tax bracket were paying almost twice the tax rate on REIT dividends. What many investors fail to consider is that the net income a corporation generates to pay dividends was taxed at the 35% corporate tax rate, and whatever was left was the money the company had to pay dividends. REITs are pass-through entities for tax purposes, so do not pay corporate income taxes if 90% of net income is passed through to investors as dividends.

Under the new law, the top tax rate for qualified dividends remains at 20%. Corporations did get a tax rate reduction, dropping from 35% down to 21%. I hope that companies take some of those income tax savings and pass them along to investors as higher dividends. It’s too early to tell if that will happen but knowing corporate management teams, I’m not holding my breath.

REIT investors first get new, lower tax brackets. The highest rate has been reduced to 37% from 39.6%. The threshold for the highest bracket has also increased from about $450,000 of income for a married couple to $600,000. Investors in lower tax brackets will also see lower marginal tax rates. In addition –and this is the big news for investors—REIT income gets a 20% deduction before the marginal tax rate is applied. This means a top tax bracket investor has a net 29.6% tax rate on REIT dividends. Married filing joint investors can have income up to $315,000 per year —the top of the 24% tax bracket—and end up with a net REIT dividend tax rate below 20%. Sweet!

If you are new or not highly informed about REITs, it is important to understand that this is not a monolith economic sector. The REIT subsectors cover almost all the different business sectors of the U.S. economy. You can find REITs that focus on properties in sectors such as telecommunications, high-tech data, housing, finance, e-commerce, finance and healthcare, to name a few. You can build a diversified REIT portfolio that will pay a very attractive dividend yield and provide economic diversification. To get you started, here are three REITs from very separate sectors.

Starwood Property Trust, Inc. (NYSE: STWD) is a finance REIT, originates and holds a portfolio of commercial mortgage loans.

This is a stock you buy for the high dividend yield, but do not look for a lot of dividend growth.

STWD is one of the largest finance REITs, and from my research, the most conservatively managed, especially regarding protecting the quarterly dividend. This stock currently yields 9.1%.

Digital Realty Trust, Inc. (NYSE: DLR) develops owns and operates data center properties. Data storage and management is a huge growth business and many companies prefer to lease space from a data center developer like Digital Realty to house their services and provide the necessary Internet and direct communication links.

Investors in DLR can look forward to double digit annual dividend growth for years, if not decades to come. Thus, unlike with STWD above where you’re holding it of the high yield with DLR you’re holding it for the high dividend growth. The shares currently yield 3.5%.

Related: 3 High Growth REITs for Profits in an Amazon World

Gramercy Property Trust (NYSE: GPT) is in the process of shifting from a mix of office and industrial properties to focus on the industrial side of their portfolio. Good move! The industrial REIT sector provides necessary support to e-commerce sales, with warehouses and fulfillment centers… sector that grow even if the rest of the country is getting “Amazoned.” For the same amount of sales, the warehouse needs of online retailing are triple the amount of space required by traditional brick and mortar retailers. Industrial real estate profits will grow right along with the growth in e-commerce retail sales. GPT current yields 5.6%.

With the start of a new year, it is natural to look for ideas to help your stock portfolio grow during the year. One bit of assistance I like to provide is to list those real estate investment trusts (REITs) that should announce higher dividend rates in the upcoming months. This knowledge can give you a jump on the rest of investing public, which will be surprised when the positive news is announced.

I maintain a database of about 130 REITs. With it I track current yields, dividend growth rates and when these companies have usually announced new dividend rates. Most REITs announce a new dividend rate once a year, and then pay that rate for the next four quarters. Currently about 90 REITs in my database have recent and ongoing histories of dividend growth. Out of that group, higher dividend announcements will happen during almost every month of the year. In 2017, the overall REIT sector ended flat for share values, with a total return consisting of the dividend yields. Through the same period, many REITs increased their quarterly or monthly dividend rates. As a result, current yields are comparatively higher than a year ago for many stocks in the sector. Higher dividend announcements can be the catalyst that starts the price recoveries for individual REIT shares.

February is an active month for REITs to announce dividend increases. Many companies use their announcement of the previous year’s financial results as a good time to declare the dividend rate for the upcoming year. Here are five REITs that I expect to announce significant dividend increases next month.

First Industrial Realty Trust, Inc. (NYSE: FR) acquires, owns and leases out industrial properties used by light industrial, warehouse and R&D companies. The company has grown its dividend by over 100% over the last two years, including a 10.5% increase last year. For the first nine months of 2017, FFO per share was up 7.5%. First Industrial pays out about 50% of FFO as dividends. Net income per share growth – which drives the minimum dividend paid – indicates another 10% dividend increase is probable.

The new dividend rate is announced with the fourth quarter earnings report that comes out in the second half of February. Record date will be the end of March with a late April payment date. FR yields 2.8%.

QTS Realty Trust Inc (NYSE: QTS) is a mid-cap – $2.5 billion value – data center REIT that came to market with an October 2013 IPO. The company is growing rapidly, but FFO per share growth is lagging revenue growth. Reported 2017 adjusted FFO per share was up 5% for the first nine months of last year.  In February 2017, the company announced an 8.3% dividend boost.

This year I forecast a 5% to 7% increase. The new dividend rate should be declared in late February with an early April payment and around March 20 record date. QTS yields 2.9%.

National Health Investors Inc. (NYSE: NHI) is engaged in the business of owning and financing healthcare properties. Its portfolio consists of real estate investments in independent living facilities, assisted living facilities, entrance-fee communities, senior living campuses, skilled nursing facilities, specialty hospitals and medical office buildings. Last year the company increased its dividend by 5.6%. Through the 2017 third quarter AFFO per share was up 9.3% compared to the same period in 2016.

The company should announce an 8% to 9% dividend increase this year, compared to 5.5% for the last couple of years. The next dividend will be announced in mid-February with an end of March record date and payment in early May. NHI currently yields 5.1%.

Weingarten Realty Investors (NYSE: WRI) is engaged in the business of owning, managing and developing retail shopping centers. Its 230 plus properties consist primarily of neighborhood and community shopping centers. This REIT has increased its dividend every year since 2010. Last year the company increased its quarterly dividend by 5.5% and paid a special $0.75 per share dividend in December. For the first three quarters of 2017, core FFO per share was 5.8% higher than over the same period in 2016. Another 6% dividend increase in 2016 seems probable. The next dividend will be announced in mid-February. Ex-dividend will occur in early March, with a mid-March payment date. WRI currently yields 4.8%.

Digital Realty Trust, Inc. (NYSE: DLR) is a large-cap data center REIT with an 11-year history of above average dividend growth. Last year, the dividend was increased by 5.7%, compared to the 10-year average annual double-digit percentage bump. Growth in 2017 has improved and I expect a 7% to 9% dividend increase for 2018.

The next dividend will be announced in mid-February, with a mid-March record date. Payment of the new dividend rate will start at the end of March. DLR currently yields 3.3%.

BONUS RECOMMENDATION:

AvalonBay Communities Inc (NYSE: AVB) business is the development, redevelopment, acquisition, ownership and operation of multifamily (apartment) communities primarily in New England, the New York/New Jersey metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California. The company is focused on the high-end of the apartment spectrum. AVB stopped growing dividends, but did not cut them, from 2008 through 2011. In recent years, the payout has grown by mid-single digits, including a 5.2% increase in 2017. FFO growth in 2017 points to another 5% to 6% increase this year. AvalonBay announces a new dividend rate in early February, with an end of March record date and payment in April. The stock yields 3.3%.

The REIT bears have gone too far this time.

In the past few days, I’ve seen a lot of panicky commentary warning that incoming Federal Reserve chair Jerome Powell will raise rates too fast after he takes over in February—and that would be a disaster for real estate investment trusts (REITs).

Don’t take the bait.

Because it all adds up more fear-fanning headlines from a business press desperate to make something out of nothing.

I’ll show you why in a moment. Then we’ll move on to 3 corners of the REIT space (and 5 stocks in particular) that underperformed in 2017—and are poised to spring back big time in 2018.

The Powell Factor

First, unless you’ve been avoiding the Internet and all newspapers for the last 6 months, you know the Fed plans hike rates further this year.

My colleague Michael Foster rattled off the reasons why in a November 21 article, but they boil down to rising wages, falling unemployment and an uptick in inflation, though it’s still below the Fed’s 2% target. That’s got futures traders pegging the next hike for the Fed’s March 21 meeting.

Source: CME Group

But whether we get the 2 rate hikes the market expects this year or 3 or more, as some talking heads predict, we can be sure of one thing: Powell will steer the same course as his predecessor, Janet Yellen.

How do I know?

Because he’s never dissented on any Fed decision since becoming a Fed governor in 2012, according to MarketWatch.

Which brings me to the relationship between rates and REITs, a linkage most people have 100% backwards—handing us a terrific opportunity to profit.

The Truth About Rates and REITs

Most folks think rising rates hurt REITs for 2 reasons.

The first: higher rates increase REITs’ borrowing costs … and it is true that REITs usually carry above-average debt to finance property purchases and renovations.

The second: that rising rates make so-called “safe” investments like CDs and Treasuries more appealing to income seekers compared to REITs.

Let me take the second point first.

As I write, the 10-Year Treasury yield sits at 2.5%, while the benchmark Vanguard REIT ETF (VNQ) pays nearly twice as much—4.3%. And plenty of REITs pay more, like a hotel operator I’ll show you in a moment that yields 7.0% today!

I think you’ll agree that this is still a big gap to close, and it will be a long time—if ever—before CDs, treasuries and the like manage to pull it off.

As for the first point, rising rates do increase REITs’ borrowing costs. But that’s only half the story! Because those hikes also come with a hot economy, which drives up rents and demand for the offices, warehouses, apartments and other properties REITs rent out.

The result? A rise in funds from operations (FFO, the REIT equivalent of earnings per share) that dwarfs higher interest costs and ignites REIT share prices.

If you don’t believe me, check the history. This is exactly what happened from July 2004 through June 2006, when the Fed hiked rates from 1.25% to 5.25%, and 10-year Treasury yields spiked to 5.14%.

How did REITs do? They soared 48%, including dividends, nearly tripling up the S&P 500’s gain.

Biggest REIT Myth Busted

The takeaway? Now is the time to buy REITs … especially if you see any of the ones on your watch list take a dip around the time of a rate-hike announcement (watch for that around March 21).

5 Top REITs From 2017 That Are Primed to Soar in ’18

To get you started, I’ve pored over my last 12 months of ContrarianOutlook.com articles to bring you 5 solid REITs, each from a different part of the REIT market.

They are: hotel operator Hospitality Properties Trust (HPT), healthcare property owner National Health Investors (NHI), apartment landlord Essex Property Trust (ESS), self-storage manager Public Storage (PSA) and government building owner Easterly Government Properties (DEA).

All have strengths that safeguard our cash and set us up for gains in 2018. HPT, for example, owns 323 hotels that focus on business travelers and operate under household names like Radisson, Holiday Inn and Marriott. The REIT also cuts its reliance on hotels with its 199 Petro and TA travel centers, all of which are located along the interstate highway system.

These are terrific businesses that will grow as trucking freight volumes zoom ahead 3.4% annually through 2023, according to the American Trucking Association.

Essex, meanwhile, boasts 59,240 apartment units in prime West Coast markets like San Francisco and LA.

As I told you in a December 7 article, Essex is cashing in as millennials skip home ownership in favor of posh downtown pads, while baby boomers swap their suburban addresses for similar abodes. (Self-storage names like PSA, by the way, benefit from these exact same trends.)

Meantime, National Health Investors and Easterly Government Properties add ballast to our portfolio. NHI provides financing for steady medical tenants such as seniors’ housing facilities and specialty hospitals, while Easterly rents its 46 sleek, modern properties to government tenants like the FBI.

Your 5-REIT Portfolio: What the Numbers Say

So with that, let’s put our 5 REITs to the test, starting with 3 crucial numbers for us income hounds: dividend yield, dividend growth and payout ratio (dividends as a percentage of core or normalized FFO; a vital measure of dividend safety).

As you can see, these 5 names give us a nice mix of high yields and dividend growth. (A side bonus: as I recently showed you in an example using Boeing (BA), a rising payout is the No. 1 driver of stock prices.)

And all of those payout ratios (including DEA’s 85.4%) are easily manageable for these REITs, which benefit from rock-solid tenants (who wouldn’t want to rent space to Uncle Sam?) and high occupancy rates—DEA’s currently sits at an unheard-of 100%!

Finally, there are some real bargains in this bin. HPT, for example, trades at a ridiculous 8.3 times adjusted FFO, with NHI and DEA at an attractive 14.5 and 18.2 times, respectively.

It’s no surprise that the two priciest trusts are Essex (20.3 times core FFO) and Public Storage (20.6). But those are fair prices (they’re both below the S&P 500’s 21.8 and down from a year ago) considering these are two of the fastest dividend growers in our basket.

My take? I expect REITs to do a big U-turn in 2018, when the market finally realizes rising rates aren’t a threat—and these 5 are in a great position to benefit.

Revealed: The Best 8% Dividend for 2018

My top REIT pick for 2018 boasts an even higher dividend than any of the 5 trusts above (8% as I write this) and grows its payout every single quarter.

In fact, this powerhouse REIT has increased its payout for 21 straight quarters, so your forward yield is actually 8.4%, given that we’re going to see 4 more dividend hikes this year!

The best part? You can buy in cheap, at just 10 times FFO!

However, I expect this stock’s valuation and price to rise 20% in 2018 as the herd finally gets used to the fact that rising rates are here to stay—and that they’re actually a benefit to REITs.

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Source: Banyan Hill