3 Top Dividend Stocks to Buy in February

The S&P 500 index is offering up a tiny little dividend yield of 1.2% right now. The average real estate investment trust (REIT) has a yield of 3.8%. All three of the REITs here beat that, with Rexford Industrial (REXR -2.52%) offering a fast-growing dividend and a 4.1% yield. Realty Income (O -0.31%) has a 5.8% yield backed by three decades’ worth of annual dividend increases. And W.P. Carey‘s (WPC -0.05%) 6.4% yield was recently cut, but there’s more to that story than meets the eye.

Rexford Industrial is for dividend growth investors

Wall Street has a bad habit of going to extremes when it gets a story in its teeth. That’s what happened with Rexford Industrial during the coronavirus pandemic period. The idea that there would be more online shopping and increased near-shoring to push up demand for industrial properties, like warehouses and manufacturing facilities, pushed the prices of industrial REITs sharply higher.

Rapid rental growth backed that story, particularly at Rexford, which operates exclusively in the Southern California market. This region is among the largest industrial markets in the world, and supply is highly constrained. But trees don’t grow to the sky, no matter how much investors wish they did. Rexford’s rental growth rates have slowed down. In the third quarter of 2024, the REIT’s rental growth was “just” 39% on expiring leases. That’s huge by any normal standard, but it’s actually a material drop from Rexford’s peak rental growth rates.

Investors have moved on to other stories (like AI), and left Rexford Industrial’s shares trading with a historically high dividend yield. But this rental growth story clearly isn’t over yet for those who don’t mind buying after the crowd has moved on.

Realty Income is for conservative income investors

The story around Realty Income isn’t nearly as exciting. It is an industry giant in the net lease niche, with over 15,400 properties and an investment grade rated balance sheet. It has a retail focus, but includes industrial and other unique assets (casinos, vineyards, and data centers) in its portfolio. And it is geographically diversified, with properties in North America and Europe. But the best stat here is the three decades of annual dividend increases at a roughly 4.3% annualized growth rate over that span.

At the end of the day, Realty Income doesn’t do anything particularly exciting other than consistently reward long-term dividend investors with slow and steady dividend growth. But a lot of income-focused investors are specifically looking for exactly this kind of stock. Realty Income is a foundational investment that you can own through good markets and bad ones. Right now, meanwhile, the dividend yield is near the highest levels seen over the past decade. That hints that this reliable dividend giant is on sale.

W.P. Carey’s dividend reset makes it a turnaround play

At the opposite end of the spectrum is W.P. Carey, which reset its dividend at the start of 2024. That move was made because management chose to jettison office properties from its portfolio in one quick move. Many dividend investors avoid companies that cut their dividend, so Wall Street appears to be in a “show me” mood with regard to W.P. Carey. Fair enough, but the REIT is attempting to show how strong it is given that it has increased its dividend every quarter since the reset.

The big story here, however, is that W.P. Carey has likely improved its business by getting out of the struggling office niche. The move freed up capital to redeploy into more attractive sectors, as well. As it puts that money to work — it had a record dollar value worth of acquisitions in the fourth quarter of 2024 — growth will tick higher. It will also be able to support ongoing dividend growth and, perhaps, increase the rate of dividend growth. For investors who like a good turnaround story, W.P. Carey appears to be a high-yield, low-risk turnaround that’s hit an important inflection point. Now could be the time to jump, before other investors catch on.

A dividend option for everyone

Just because buying the S&P 500 index will leave you wanting on dividends doesn’t mean you can’t find attractive dividend stocks, and a wide variety of them at that. Rexford is an attractive dividend growth stock with a historically high yield. Realty Income is a boring stock with a high yield and a very impressive history of growing its dividend over time. And W.P. Carey is a high-yield turnaround story that looks like it’s turning for the better. It is highly likely that one, or more, of these attractive yield opportunities will find a way into your portfolio as February gets underway.