3 REITs Every Investor Should Know About

Real estate investment trusts (REITs) are popular investments for income investors. They buy properties, rent them out, and split the rental income with their shareholders. They also must pay out at least 90% of their taxable income as dividends to maintain a lower tax rate.

However, most REITs are sensitive to interest rates. In 2022 and 2023, rising interest rates made it more expensive to acquire new properties while kicking up headwinds for their tenants. Their dividend-paying shares also became less attractive than higher-yielding CDs and T-bills.

Yet in 2024 and 2025, the Fed cut its benchmark rate six times in a row. Those rate cuts are making REITs more desirable again, so it might be smart to invest in some of those top names before the income-driven investors rush back and drive up their valuations. Here are three top REITs which I'd recommend loading up on today: Realty Income (NYSE: O), Vici Properties (NYSE: VICI), and Digital Realty Trust (NYSE: DLR).

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Realty Income

Realty Income, which owns more than 15,500 commercial properties across the U.S. and Europe, is one of the world's largest REITs. It mainly leases those properties to recession-resistant retailers, such as drugstores, discount stores, and convenience stores. Its top tenants are 7-Eleven, Dollar General, and Walgreens.

Some of its weaker tenants struggled with store closures over the past few years, but its stronger tenants picked up that slack by opening more stores. That's why its occupancy rate, which has stayed above 96% since its IPO in 1994, still came in at 98.7% in its latest quarter.

As a triple-net lease REIT, Realty's tenants also need to cover their own maintenance fees, insurance, and property taxes. That structure allows the company to generate stable profits, as measured by its adjusted funds from operations (AFFO), to cover its monthly dividends.

It pays a forward yield of 5.3%, and it has raised its payout 132 times since its public debut. It expects its AFFO per share to grow 1%-2% to $4.25-$4.27 in 2025, which should easily cover its forward dividend rate of $3.22. At $61, it trades at just 14 times its trailing AFFO per share -- so it's a safe place to park your cash and earn some extra income.

Vici Properties

Vici is an experiential REIT that owns 93 casinos, resorts, and other entertainment properties across the U.S. and Canada. Its top tenants include Caesar's Entertainment, MGM Resorts, and Penn Entertainment.

Many of its tenants are vulnerable to macroeconomic headwinds, yet Vici has maintained a 100% occupancy rate since its 2018 IPO. It accomplished that by locking its tenants into multi-decade leases, most of which are tied to the Consumer Price Index (CPI), allowing it to raise rents to keep pace with inflation. It's also a triple-net lease REIT.

Vici's resilient business model enabled it to raise its quarterly dividends every year since its public debut. It currently pays a forward yield of 6.1%, and it expects AFFO to rise 4%-5% to $2.36-$2.37 per share in 2025, comfortably covering its forward dividend rate of $1.80. At $29, it still looks like a bargain at 16 times its trailing AFFO per share.

Digital Realty

Digital Realty is a triple-net-lease data center REIT that operates more than 300 data centers for over 5,000 customers across more than 50 metropolitan areas. It serves over half of the Fortune 500, including IBM, Oracle, and Meta.

Over the past four years, Digital Realty's AFFO dipped, and it stopped raising its quarterly dividends. Still, that slowdown primarily was due to divestments of its older "non-core" data centers -- which had less growth potential than its higher-growth hyperscale data centers. Higher interest rate expenses, rising operating costs, and a strong U.S. dollar exacerbated that pressure.

However, Digital Realty's growth should stabilize again as it concludes those divestments, inflation cools, interest rates decline, and it fully rightsizes its business. For 2025, it expects its constant-currency core FFO to rise 8%-9% to $7.25-$7.30 per share, covering its forward dividend rate of $4.88 per share. It currently pays a forward yield of about 3%. It also expects its occupancy rate, which came in at 82.9% in 2024, to rise 100-200 basis points in 2025.

That stable outlook makes Digital Realty a balanced way to profit from the secular expansion of the cloud infrastructure, artificial intelligence (AI), and high-performance computing (HPC) markets while generating stable income. It should also be less volatile than the higher-growth AI stocks.

Leo Sun has positions in Meta Platforms, Realty Income, and Vici Properties. The Motley Fool has positions in and recommends Digital Realty Trust, International Business Machines, Meta Platforms, Oracle, and Realty Income. The Motley Fool recommends Vici Properties. The Motley Fool has a disclosure policy.