New York, NY – Investors are closely watching the performance of Real Estate Investment Trusts (REITs) in the wake of a surge in interest rates. Despite concerns, the sector has seen significant resilience over the past two years.

Many REITs are actually faring well due to several key factors. For instance, leverage in the sector is currently at historical lows, with average loan-to-value ratios hovering around 35%. Additionally, most REIT debt carries fixed interest rates, providing stability in the face of rising rates. Moreover, debt maturities are long and well-staggered, averaging around 7 years.

Rental income continues to rise across various sectors, driven by recent inflation trends. Furthermore, REITs have maintained historically low payout ratios, enabling them to acquire assets from distressed sellers and execute share buybacks at attractive valuations.

Amidst the challenging environment, some REITs have displayed remarkable growth, particularly in terms of dividend payouts. For example, SBA Communications (SBAC) recently raised its dividend by 15%, showcasing strong dividend growth potential. The company’s prudent financial management, coupled with a relatively low payout ratio, positions it well for sustained growth in the coming years.

Rexford Industrial Realty (REXR) stands out for its rapid dividend growth, fueled by a focus on last-mile industrial properties in high-demand markets. With a robust pipeline for property development and repositioning, REXR anticipates substantial growth in the near future.

EastGroup Properties (EGP) operates in Sunbelt markets, capitalizing on the region’s rapid population growth. By focusing on Class A last-mile properties, EGP mitigates risks associated with increased supply in the market, setting the stage for continued dividend growth.

Iron Mountain (IRM), on the other hand, faces challenges with its current valuation, trading at historically high multiples. Despite concerns, the company has managed to increase its dividend by 10%, leveraging its valuation to fund growth projects.

The REIT sector, often viewed as income investments, offers investors the potential for substantial total returns. While market sentiment may be lukewarm, many REITs demonstrate resilience and prospects for continued dividend growth.