3 real estate investment trusts to grow old and retire with

Long-term investing in real estate can bring in years of income.

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Real estate investment trusts (REIT) can be rewarding investments for long-term investors. They may not rise in share price like a fast growing stock, but returns are usually steady. Regular distributions can be a welcome part of your overall returns and give your portfolio more diversification.

These three REITs offer decent dividend yields and are large enough to drive their businesses efficiently for further growth.

Dexus Property Group (ASX: DXS) specialises in owning, developing and managing office, industrial and retail properties. The $5.5 billion company will acquire the Commonwealth Property Office Fund (ASX: CPA) with its consortium partner, the Canada Pension Plan Investment Board.

Once the acquisition is finalised, Dexus is considering selling some office towers in the newly purchased property portfolio to reduce its gearing. It may be working out a deal with GPT Group (ASX: GPT) for those towers. GPT attempted a rival takeover offer, yet withdrew it hoping to get some of the assets from Dexus.

In its 1H FY2014 report, Dexus achieved a $277.2 million statutory net profit, up almost 4% on the pcp. Its half-year distribution was raised to 3.07 cents per security and a total annual distribution for FY2014 is expected to be 6.24 cents per security. Currently it has a dividend yield of 5.3%.

Westfield Group (ASX: WDC), the vertically integrated shopping centre group has interests in 91 Westfield shopping centres. In the 12 months ended 31 December 2013, shareholder distribution rose to 51 cents per security. The current dividend yield is 5.0%.

Its full year FY2014 guidance for funds from operation (FFO) is 68.6 cents per security, about a 3.2% increase from the previous corresponding period. Its distribution forecast is for a similar 3.2% rise from FY2013.

Investa Office Fund (ASX: IOF) owns a portfolio of internationally diversified office properties, of which many are leased to government and blue-chip tenants. The portfolio contains 46 assets with $8 billion in assets under management.

Its funds from operation were up 8% for 1H FY2014. Distributions per unit rose 6% to 9.25 cents. It is forecasting a 4.2% rise in full-year distribution to 18.5 cents per unit. There may be opportunities to make further high quality acquisitions and pursue a recycling of assets.

Currently its dividend yield is 5.6%.

Foolish takeaway

I prefer Dexus Property Group because it has a good balance of business growth and dividend returns. Its acquisition of Commonwealth Office Property Fund will add nicely to future revenue. Opportunities like that don’t pop up every day, so it moved decisively to seize it.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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