Are you are planning to pour your hard-earned money into the real estate investment trust (REIT) sector, or have already invested in it? Then you must be worried about the recent 50 basis point hike in the benchmark interest rate this week by the Federal Reserve and the indication that the rates might be kept higher for an extended period of time.

However, rather than worrying, a focus on the unique feature of this distinct asset class can fetch you a steady income and help to survive market volatility.

In fact, with the roller coaster ride in the stock market this year — thanks to high inflation and a quick rise in interest rates that is weighing on asset prices — the focus has now shifted to investing in quality companies with a consistent track of paying dividends. Obviously, this brings us to the REITs because solid dividend payouts are arguably the biggest enticements for REIT investors.

Income-seeking investors still have a large appetite for REIT stocks, as U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends. This has enabled the industry to stand out and gain a footing over the last 15-20 years.

Ushering in good news for investors, particularly income-seeking ones, recently, a number of REITs declared their dividend hikes. Among them are Realty Income Corporation (O Quick QuoteO - Free Report) , Alexandria Real Estate Equities, Inc. (ARE Quick QuoteARE - Free Report) and Mid-America Apartment Communities, Inc. (MAA Quick QuoteMAA - Free Report) .

What’s more to drive you to invest in REITs?

What’s more encouraging is REITs’ characteristic of providing natural protection against inflation. Particularly, both rents and real estate values have a tendency to move north with prices increasing, thereby aiding dividend growth.

This hybrid asset class not only provides protection against inflation but also benefits from the improving fundamentals of the underlying asset categories as well as the location of properties. In fact, with the waning of the pandemic-related concerns, REITs, which invest in all types of properties, from residential, industrial, offices and malls to hospitals, hotels, data centers and several others, are experiencing an improvement in a number of these asset categories.

Also, according to the third-quarter data from the Nareit Total REIT Industry Tracker Series (T-Tracker) report, even amid a period of high inflation as well as rising rates, REITs’ operational performance exhibited strength with 14.9% and 8.1% year-over-year increases in funds from operations and net operating income, respectively.

As REITs continue to experience earnings growth, this special hybrid asset class remains well-positioned to deliver a decent stream of dividend income to investors.

Now, if REITs’ historical dependence on debt makes investors skeptical in a rising rate environment, it needs to be noted that over the years, REITs have managed their balance sheets efficiently and are now well prepared for a rising rate environment. Instead of looking for debt to finance the portfolios, these companies have strategically resorted to equity capital over the past decade.

Let’s discuss these REIT stocks in detail:

Headquartered in San Diego, CA, Realty Income is engaged in the acquisition and management of freestanding commercial properties that reap rental revenues under long-term net lease agreements with commercial clients. This Zacks Rank #3 (Hold) stock has a market cap of $40.54 billion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

This week, Realty Income announced its 118th common stock monthly dividend hike since the company’s NYSE listing in 1994. Delighting its shareholders, the company will now pay out 24.85 cents per share in dividend compared with the 24.80 cents paid earlier.

The increased dividend will be paid out on Jan 13 to shareholders on record as of Jan 3, 2023. The latest dividend rate marks an annualized amount of $2.982 per share compared with the prior rate of $2.976.

O currently pays investors $2.98 per share, or 4.60%, on an annual basis. The company increased its dividend 24 times in the past 5 years, and its payout has grown 2.98% over the same time period. Check Realty Income’s dividend history here.

Realty Income Corporation Dividend Yield (TTM)

Realty Income Corporation dividend-yield-ttm | Realty Income Corporation Quote

The latest hike reflects Realty Income’s ability to generate decent cash flow through its operating platform and high-quality portfolio. It derives more than 90% of its annualized retail contractual rental revenues from tenants with a service, non-discretionary and a low-price-point component to their business.

Such businesses are less susceptible to economic recessions and competition from Internet retailing and provide more reliable streams of income. Realty Income maintains high occupancy levels consistently, and its diversified tenant base, accretive buyouts and robust balance sheet bode well for its growth.

Pasadena, CA-based Alexandria Real Estate Equities, Inc. is an office REIT, focusing particularly on collaborative life science, agtech and technology campuses. This Zacks Rank #3 (Hold) stock has a market cap of $24.68 billion.

On Dec 5, Alexandria Real Estate announced a 2.5% sequential hike in its fourth-quarter 2022 cash dividend payout. Alexandria will now pay out a dividend of $1.21 per share, up from the $1.18 paid out in the third quarter. The increased dividend will be paid out on Jan 13, 2023 to shareholders on record as of Dec 30, 2022.

Based on the increased rate, the annual dividend comes to $4.84 per share. For the year ending Dec 31, 2022, the common stock dividend marks an increase of 24 cents or 5% year over year.

ARE currently pays investors $4.72 per share, or 3.14%, on an annual basis. The company increased its dividend 11 times in the past 5 years, and its payout has grown 6.11% over the same time period. This is attractive to income investors and represents a steady income stream. Moreover, Alexandria’s current payout ratio is 57%. Check Alexandria’s dividend history here.

Alexandria Real Estate Equities, Inc. Dividend Yield (TTM)

Alexandria Real Estate Equities, Inc. dividend-yield-ttm | Alexandria Real Estate Equities, Inc. Quote

The high demand for ARE’s Class A properties in AAA locations is boosting the level of occupancy and driving growth in rents. The company is witnessing strong demand for space in key life science markets.

Moreover, Alexandria has adequate financial flexibility to enhance its market position and capitalize on long-term growth opportunities. Looking at the company’s solid operating platform, balance sheet strength, ability to generate cash flows and payout ratio, it is likely to be able to sustain the hiked dividend.

Mid-America Apartment Communities, also known as MAA and based in Germantown, TN, is engaged in owning, managing, acquiring, developing and redeveloping quality apartment communities, mainly in the Southeast, Southwest and Mid-Atlantic regions of the United States. This Zacks Rank #3 (Hold) stock has a market cap of $19.13 billion.

On Dec 13, MAA’s board of directors approved an increase in the company’s quarterly dividend payment. The company will now pay out $1.40 per share, which reflects a hike of 12% from the prior dividend of $1.25.

Based on the increased rate, the annual dividend comes to $5.60 per share, denoting an increase of 60 cents per share from the prior dividend level. The new dividend will be paid out on Jan 31, 2023 to shareholders of record as of Jan 13, 2023. MAA has delivered 13 years of consecutive dividend increases.

MAA currently pays investors $5.00 per share, or 3.10%, on an annual basis. The company increased its dividend 7 times in the past 5 years, and its payout has grown 4.95% over the same time period. MAA's payout ratio currently sits at 62% of earnings. Check Mid-America Apartment’s dividend history here.

MidAmerica Apartment Communities, Inc. Dividend Yield (TTM)

MidAmerica Apartment Communities, Inc. dividend-yield-ttm | MidAmerica Apartment Communities, Inc. Quote

MAA’s diversified Sunbelt portfolio of suburban-focused communities was less severely affected by the pandemic and the economic shutdown. The pandemic accelerated employment shifts and population inflow into the company’s markets as renters sought more business-friendly, lower-taxed and low-density cities.

Amid these, MAA is poised to capture recovery in demand and leasing compared with expensive coastal markets. MAA’s current cash flow growth is projected at 39.17% compared with 14.86% growth projected for the industry. Looking at its lower dividend payout (compared to its industry), it seems that its dividend distribution is expected to be sustainable.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.