The Smartest Dividend Stocks to Buy With $500 Right Now

Investing in dividend stocks can be a smart way to generate passive income and grow your wealth over time. With interest rates starting to fall, Real Estate Investment Trusts (REITs) are poised to benefit, making them some of the smartest dividend stocks to buy right now. In this article, we'll explore three REITs that offer attractive yields and growth prospects, allowing you to build a diversified portfolio with just $500.



1. Realty Income (O)
Realty Income is a steady grower with a catalyst, offering a dividend yield of over 5%. Its shares are currently more than 15% below their peak from three years ago when interest rates were lower. As interest rates start to fall, Realty Income's borrowing costs will decrease, enabling it to invest more in acquisitions and development projects. This REIT has a stellar record of dividend growth, having increased its payout for 108 straight quarters and 127 times overall since it went public in 1994. With interest rates shifting from a headwind to a tailwind, Realty Income should have no trouble continuing to expand its portfolio and payout in the future.



2. Mid-America Apartment Communities (MAA)
Shares of Mid-America Apartment Communities have lost nearly 30% of their value from a few years ago, partially due to higher rates weighing on the value of apartment buildings. This slump has pushed its dividend yield up over 3.5%. Another issue impacting Mid-America has been a surge in the supply of new apartments, driven by a post-pandemic building boom. However, its markets are steadily absorbing that new supply as residents move into those brand-new apartments. On a positive note, higher rates in recent years have caused a significant slowdown in new apartment construction. Because of that, the REIT expects deliveries to decline in the coming months, driving a reacceleration in rent growth. Meanwhile, Mid-America has started to go on the offensive by acquiring new communities and approving development projects, which should help further accelerate its growth in the coming years.



3. Prologis (PLD)
Shares of leading industrial REIT Prologis have plunged about 25% from their peak a few years ago, driving its dividend yield up to around 3%. A big driver has been the impact of higher interest rates on its tenant base, causing some current and prospective tenants to delay making decisions on leases this year. This indecision caused the REIT to reduce its guidance for 2024. However, the company sees this as only a temporary setback lasting a few quarters. In the long term, Prologis is optimistic about demand for warehouse space and plans to capitalize on new growth opportunities, like data centers and energy, to further accelerate its growth prospects. This should enable it to continue growing its dividend at a well-above-average rate, positioning the REIT to potentially produce superior total returns in the coming years.



In conclusion, interest rates are shifting from a major headwind to a significant tailwind for REITs. Falling rates will lower their borrowing costs while increasing the value of their real estate, positioning investors to earn strong returns from REITs in the coming years. With just $500, you can build a diversified portfolio of dividend stocks by investing in leaders like Realty Income, Mid-America Apartment Communities, and Prologis. These REITs offer attractive yields and growth prospects, making them some of the smartest dividend stocks to buy right now.