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REITs have loyal followers in dividend investors because they must distribute at least 90% of their taxable income each year to shareholders as dividends. For those looking for extra income, we screened for REITs with a dividend yield of at least 2%.

Next, we screened for those with bullish sentiment from institutional investors, with significant net institutional purchases over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to outperform into the future.

Interactive Chart: Press Play to compare changes in analyst ratings and market cap over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

The final list is below. Interestingly, The VANGUARD GROUP, INC. is a top institutional holder in all 3 of these firms. FMR LLC has top holdings in 2 of the names.

Do you think these hedge funds are calling it right on these REITs? Use this list as a starting point for your own analysis.

1. Colony Financial, Inc. (NYSE:CLNY): Focuses on acquiring, originating, and managing commercial mortgage loans and other commercial real estate-related debt investments. Market cap at $819.45M, most recent closing price at $20. Dividend yield at 6.99%.

Net institutional purchases in the current quarter at 5.6M shares, which represents about 13.86% of the company's float of 40.41M shares. This is a notable improvement over the previous quarter's net -698.8K shares sold. Top institutional holders are WELLINGTON MANAGEMENT COMPANY, Robeco Investment Management, Inc., ROYCE & ASSOCIATES, LLC, and The VANGUARD GROUP, INC.

2. Newcastle Investment Corp. (NYSE:NCT): Operates as a real estate investment and finance company that invests in and manages a portfolio consisting primarily of real estate securities. Market cap at $1.44B. Dividend yield at 10.49%.

Net institutional purchases in the current quarter at 11.7M shares, which represents about 6.96% of the company's float of 172.50M shares. This is much greater than the 6.8M shares purchased in the previous quarter. Top institutional holders are FMR LLC, The VANGUARD GROUP, INC., ASCEND CAPITAL, LLC, and BlackRock Fund Advisors.

3. National Retail Properties, Inc. (NYSE:NNN): A publicly owned equity real estate investment trust. The firm acquires, owns, manages, and develops retail properties in the United States. Market cap at $3.4B. Dividend yield at 5.14%.

Net institutional purchases in the current quarter at 6.9M shares, which represents about 6.37% of the company's float of 108.36M shares. This is much more optimistic than the net -2.0 M shares purchased in the previous quarter. Top institutional holders are The VANGUARD GROUP, INC., STATE STREET CORPORATION, FMR LLC and JP MORGAN CHASE & COMPANY.

Institutional data sourced from Fidelity, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

Source: Institutions Are Buying These 3 Rich Dividend Diversified REITs