Income investors are drawn to Real Estate Investment Trusts (REITs) as these stocks tend to offer sizable dividends.

Furthermore, REITs offer a cheaper alternative to property ownership without having to break the bank to buy or invest in these expensive tangible assets directly. Outside of a lower capital requirement, investors prefer REITs because of their diversification and tax advantages, such as not being subject to corporate tax in many instances.

Liquidity is also a prime benefit of investing in REITs since they are traded on stock exchanges, making them more liquid than physical properties. Despite the implied volatility of the stock market, REITs are managed by professionals, which alleviates the strains of property management.

Lastly, by law, REITs are required to distribute at least 90% of their taxable income to shareholders, which is why they tend to have such lofty dividends.

Keeping this in mind, here are three highly ranked REITs to consider with a Zacks Rank #1 (Strong Buy).

Arbor Realty Trust - ABR

Trading under $15 a share, Arbor Realty Trust ABR stock is standing out with the highest dividend yield on the list at 12.46%. Arbor Realty is a specialized real estate finance company that invests in real estate-related-bridge and mezzanine loans, preferred equity, and mortgage-related securities.

Notably, Arbor Realty has increased its dividend 12 times in the last five years with an annualized dividend growth rate of 9.05% during this period. Making its affordable price tag and monstrous dividend more appealing is that ABR trades at 8X forward earnings, which is on par with its Zacks REIT and Equity Trust Industry average and well below the benchmark S&P 500’s 23.1X.

Image Source: Zacks Investment Research

Alexander’s - ALX

Having a niche in leasing, managing, developing, and redeveloping properties, Alexander’s ALX immense profitability is being magnified by its 8.91% annual dividend.

Alexander’s generous dividend and earnings potential tend to keep investors engaged with ALX trading around $205 and at 17.8X forward earnings. Trading beneath the benchmark, ALX is near its Zacks REIT and Equity Trust-Other Industry average of 15.3X forward earnings. Most intriguing and indicative of more upside for ALX is that over the last 30 days, fiscal 2025 and FY26 EPS estimates have soared 15% and 27%, respectively.

Image Source: Zacks Investment Research

Annaly Capital Management - NLY

Rounding out the list is Annaly Capital Management NLY, which manages a portfolio of mortgage pass-through certificates, collateralized mortgage obligations (CMOs), and credit risk transfers. Annaly’s holdings may also comprise other securities with interests or obligations backed by pools of mortgage loans, residential mortgage loans, and corporate debt.

Hitting a 52-week high of $21 a share, NLY has spiked +17% year to date but still trades at just 7.5X forward earnings.

Image Source: Zacks Investment Research

Even better, the rally could continue with FY25 and FY26 EPS estimates nicely up in the last month for Annaly as well.  

Image Source: Zacks Investment Research

Plus, the cherry on top of its strong stock performance is that NLY has a 12.14% annual dividend yield that towers over the S&P 500’s 1.18% average and tops the Zacks REIT and Equity Trust Industry average of 11.47%.  

Image Source: Zacks Investment Research

Bottom Line

Considering their reasonable valuations, now appears to be an ideal time to buy these top-rated REITs. To that point, they may be poised to outperform the broader market in the near future, and their sizable dividends make them suitable for long-term investors.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Arbor Realty Trust (ABR) : Free Stock Analysis Report

Annaly Capital Management Inc (NLY) : Free Stock Analysis Report

Alexander's, Inc. (ALX) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research