REITs: A Mostly Harmless Investment?

The question of whether to invest in the S&P 500 or Real Estate Investment Trusts (REITs) is, as these things invariably are, profoundly complicated. It’s a bit like asking whether to have tea or a slightly-used spaceship. Both have their merits, but the correct answer depends entirely on your personal tolerance for lukewarm beverages and existential dread. (And, naturally, your portfolio diversification strategy.)

Historically – and we’re talking over timescales that make geological epochs seem like a quick lunch break – REITs have, on average, outperformed the S&P 500. We’re talking annual returns in the 11% to 12% range over 25 to 52 years. The S&P 500, meanwhile, has been chugging along at a respectable, but comparatively modest, high single-digit pace. This suggests that, if you’re planning for the long haul – say, the next few millennia – REITs might be the slightly less improbable option.

However, the last decade has been something of an anomaly. The S&P 500 has enjoyed a period of, shall we say, enthusiastic growth, leaving REITs looking a little… contemplative. (It’s important to remember that past performance is no guarantee of future results, which is a phrase designed to simultaneously inform you of something obvious and absolve everyone of any responsibility whatsoever.) But, crucially, REITs generally exhibit lower volatility than the broader stock market. Which is to say, they’re less likely to induce spontaneous combustion in your portfolio.

Therefore, it’s often prudent to consider including a few high-quality REITs within a diversified long-term portfolio. Three particularly interesting specimens are Realty Income (O 0.85%), Prologis (PLD 0.33%), and Simon Property Group (SPG +0.25%). Let’s examine them, shall we? (Don’t worry, there won’t be a quiz.)

Realty Income: Monthly Dividends and a Steadfast Approach

Realty Income, with the wonderfully descriptive ticker symbol ‘O’ (presumably for ‘Obligation’ – to pay you dividends, naturally), is a retail REIT that owns over 15,500 properties across the U.S. and Europe. Its primary focus is dividends, and it has a rather impressive 32-year track record of consistently increasing them. (Which is more than most of us can say for consistently increasing our ability to locate matching socks.)

What sets Realty Income apart is its monthly dividend payments. Most companies dole out dividends quarterly, but Realty Income prefers to keep the cash flowing at a more frequent pace. This is particularly appealing to investors seeking a steady stream of income. At current prices, the REIT yields around 5.3%, with dividends increasing by an average of 3.5% annually over the past decade. For conservative investors, it’s a rather solid choice. (Unless, of course, you’re secretly a pirate. In which case, gold doubloons are probably a better bet.)

Prologis: Logistics, Warehouses, and a Global Footprint

Prologis bills itself as “the global leader in logistics real estate.” This essentially means they own a vast network of warehouses and distribution centers across 20 countries. They hold interests in over 1.3 billion square feet of logistics space. (That’s a lot of cardboard boxes.)

With its focus on geographic and property diversification, Prologis has built a strong dividend and growth track record. The stock currently yields around 3.2%, and has increased its dividend for 12 consecutive years. Over the past decade, annualized dividend growth has averaged over 10%. Since its 1994 IPO, Prologis has delivered gains of 481%, versus a 432% gain for the S&P 500. While it has underperformed the S&P 500 in recent years, factors such as lower interest rates and its expansion into data centers could drive stronger returns in the future. (Assuming, of course, that the robots don’t take over and render warehouses obsolete.)

Simon Property Group: Malls, Outlets, and the Retail Landscape

Simon Property Group specializes in acquiring and owning high-quality retail properties, such as regional malls and premium shopping outlets. This focus on asset quality has enabled the REIT to weather many of the headwinds experienced by owners of lower-end retail properties. (It’s a bit like the difference between a luxury yacht and a leaky rowboat.)

Currently, this REIT has a 4.2% forward dividend yield. Over the past 10 and 20 years, annual dividend growth has averaged 3.1% and 5.5%, respectively. Simon continues to pursue acquisitions, including the recent purchase of the remaining 12% interest in competitor Taubman Realty Group. Management expects the Taubman acquisition to be accretive to earnings starting in 2027. (Which, in the grand scheme of things, is only a blink of an eye.)

2026-01-28 21:23

Realty Income: Monthly Dividends and a Steadfast Approach

Prologis: Logistics, Warehouses, and a Global Footprint

Simon Property Group: Malls, Outlets, and the Retail Landscape

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