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Summary

  • For each S&P 500 industry sector, I will be taking a look at available companies to help determine the best stocks for income investors.
  • In determining the best stocks per industry, I will be examining both the dividend growth and dividend yields of the stocks.
  • I believe that HCP offers the best value/reward combination out of this group of REIT stocks.

Overview

In this series of articles, I will be identifying which stocks for various S&P industries are best suitable for income investors, based on dividend growth and yield. For Part 6, I will be taking a look at REITs. These stocks include:

  • American Tower (NYSE:AMT)
  • Apartment Investment & Mgmt (NYSE:AIV)
  • AvalonBay Communities, Inc. (NYSE:AVB)
  • Boston Properties (NYSE:BXP)
  • Crown Castle International Corp. (NYSE:CCI)
  • Equity Residential (NYSE:EQR)
  • General Growth Properties Inc. (NYSE:GGP)
  • HCP Inc. (NYSE:HCP)
  • Heath Care REIT, Inc. (NYSE:HCN)
  • Host Hotels & Resorts (NYSE:HST)
  • Kimco Realty (NYSE:KIM)
  • Plum Creek Timber Co. (NYSE:PCL)
  • Public Storage (NYSE:PSA)
  • Simon Property Group Inc (NYSE:SPG)
  • Vornado Realty Trust (NYSE:VNO)
  • Weyerhaeuser Corp. (NYSE:WY)

When ranking the dividend-paying stocks by yield, the order is as follows:

  • HCP - 5.20%
  • Health Care REIT - 4.96%
  • Plum Creek Timber - 3.99%
  • Kimco Realty - 3.95%
  • AvalonBay Communities - 3.32%
  • Apartment Investment - 3.30%
  • Public Storage - 3.25%
  • Equity Residential - 3.23%
  • Simon Property Group - 2.95%
  • Weyerhaeuser - 2.89%
  • Vornado - 2.76%
  • Host Hotels & Resorts - 2.58%
  • General Growth Properties - 2.54%
  • Boston Properties - 2.18%
  • Crown Castle - 1.81%
  • American Tower - 1.45%

When ranking them by dividend growth over the past five years, the order is as follows:

  • Weyerhaeuser - 1,090%
  • Simon Property Group - 1,010%
  • Host Hotels & Resorts - 472.40%
  • Kimco Realty - 275.00%
  • Apartment Investment - 160.00%
  • Public Storage - 154.50%
  • Vornado - 93.73%
  • Boston Properties - 30.00%
  • AvalonBay Communities - 29.97%
  • HCP - 18.48%
  • Health Care REIT - 16.91%
  • Plum Creek Timber - 4.76%
  • Equity Residential - 3.63%
  • Crown Castle - 0%
  • American Tower - (8.57%)
  • General Growth Properties - (18.70%)

Based on yield and dividend growth, I don't think American Tower, Crown Castle, Boston Properties, General Growth Properties, Host Hotels & Resorts, or Equity Residential are good candidates for income investors.

HCP, Health Care REIT, Plum Creek Timber, Kimco Realty, Weyerhaeuser, and Simon Property Group appear to be the best options based on high yield, high dividend growth, or both. So, let's take a closer look at each of these stocks to see which are best suited for long-term income investors.

Revenue

Looking at the chart below, you can see that Health Care REIT has performed significantly better than the other stocks over the past five years, while Plum Creek Timber is the only stock to have seen a decline in revenue over this period of time.

HCP Revenue (<a href=

HCP Revenue (TTM) data by YCharts

When looking at earnings, you can see that HCP and Simon Property Group have been the best performers, while Health Care REIT and Weyerhaeuser have both seen declines in earnings.

HCP EPS Basic (<a href=

HCP EPS Basic (TTM) data by YCharts

Based on price to book value, both HCP and Health Care REIT seem to be valued attractively, while Simon Property Group seems to be greatly overvalued.

HCP Price to Book Value Chart

HCP Price to Book Value data by YCharts

When looking at advanced metrics, you can see that HCP has the highest YCharts value score while Simon Property Group has the lowest.

HCP Value Score Chart

HCP Value Score data by YCharts

HCP ranks first in terms of fundamental score as well, while Weyerhaeuser ranks last.

HCP Fundamental Score Chart

HCP Fundamental Score data by YCharts

Conclusion

Based on all the information, I feel that HCP belongs at the top of the list out of this group of stocks for long-term income investors. HCP offers the highest dividend yield, and while the dividend growth hasn't been fantastic, it has been consistent (29 consecutive years of increases).

HCP ranked 2nd in terms of revenue, 1st in terms of earnings, had the lowest price to book value, and also had the best value and fundamental YCharts scores. I think its engagement in the healthcare industry gives it some added value that several of the other REITs lack.

I think Health Care REIT and Kimco Realty are two other nice opportunities investors should consider, but my top choice is HCP. As always, I suggest individual investors perform their own research before making any investment decisions.

Source: The Best Dividend Growers, Part 6: HCP