The Smartest Dividend Stocks to Buy With $250 Right Now

Hundreds of companies pay dividends. Many of them are excellent options for those seeking a steadily rising income stream.

However, some of the smartest dividend stocks to buy right now are real estate investment trusts (REITs). They have been under a lot of pressure in recent years because of the impact higher interest rates have on real estate values. Their stock prices have fallen, boosting their dividend yields. That enables investors to generate more income on every dollar they invest. In addition to that income, REITs offer lots of upside potential when rates start falling, which many expect will happen in the coming months. Agree Realty (ADC), Extra Space Storage (EXR -0.24%), and Rexford Industrial Realty (REXR -1.13%) are three great REITs to buy right now. They can turn a $250 investment into an above-average and growing income stream.

Ringing up a steadily rising income stream

Agree Realty is a retail REIT focused on free-standing properties net leased or ground leased to high-quality retailers relatively immune to economic downturns and the pressures of e-commerce. Those lease structures provide it with very stable rental income to pay dividends.

Agree Realty's dividend yield is approaching 5%, partly because of a nearly 25% decline in its share price from its peak because of higher interest rates. A $250 investment would generate more than $12 of annual dividend income at that rate. For comparison, a $250 investment in an S&P 500 index fund would only produce a little more than $3 of annual dividend income, given its 1.3% yield.

That income stream should steadily rise. The REIT has grown its dividend at a 5.6% compound annual rate over the past decade. Agree Realty's main growth driver is acquiring more income-producing retail properties. It expects to buy $600 million of properties this year, which should grow its adjusted funds from operations (FFO) by about 4%. It should have plenty of acquisition opportunities. Its existing retail partners own over 165,000 locations that they could monetize via sale-leaseback transactions. That gives Agree Realty a very long growth runway.

Spacious dividend growth

Extra Space Storage is the leading self-storage REIT. It generates steadily rising income as consumers and businesses rent space in its self-storage properties. Growing demand has kept occupancy levels high, enabling the REIT to routinely increase rental rates.

The REIT's payout currently yields 4.5%, in part because of a more than 25% decline in its share price from its peak before rates started rising. It has done an excellent job growing its payout over the years, delivering a nearly 245% increase over the past decade.

Extra Space should have plenty of room to continue increasing its payout in the future. The self-storage industry is highly fragmented. That provides lots of opportunities for Extra Space to grow its industry-leading third-party management platform and its owned portfolio. In addition, it can increase its income by raising rents, expanding and redeveloping existing sites, and providing funding to third-party developers.

Growing briskly

Rexford Industrial Realty is an industrial REIT focused on the Southern California market. It owns warehouse and distribution properties leased to tenants across various industries. The REIT's focus on Southern California has paid big dividends because of very tight supply and high demand. That keeps occupancy high, enabling the REIT to increase rents briskly.

The REIT currently yields over 3.5%, driven up partly by the more than 45% decline in its stock price from its peak a few years ago because of higher rates. The REIT has also grown its payout at an 18% average annual rate over the last five years.

Rexford is in a strong position to continue growing its dividend in the future. In addition to rent growth, the REIT has an excellent record of making accretive acquisitions. It has secured about $1.4 billion of acquisitions this year, which will provide it with a growing income stream. Rexford believes these deals and its embedded internal drivers will grow its net operating income by 47% over the next three years. Meanwhile, it has plenty of financial flexibility to continue making accretive acquisitions to further enhance growth.

Great REITs for income (and upside potential)

REITs have been under a lot of pressure because of higher interest rates in recent years. That's allowing investors to buy some top-notch REITs like Agree Realty, Extra Space Realty, and Rexford Industrial Realty at lower prices and higher dividend yields. In addition to their attractive and growing income streams, REITs offer lots of upside potential as rates fall. They're some of the smartest dividend stocks investors can buy these days.