If you're concerned about having enough income after you retire, there are lots of options. Buying rental properties is a popular one, but finding tenants and keeping up with maintenance often requires more effort than many retirees have in mind.

If dealing with contractors and tenants isn't your idea of a good time, I have great news. Real estate investment trusts, or REITs, are a terrific way for everyday investors to collect rent without owning any buildings themselves. REITs trade like stocks, but these specialized entities can legally avoid income taxes by distributing at least 90% of their profit to shareholders as dividends.

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Realty Income(NYSE: O) and W.P. Carey(NYSE: WPC) are well-established REITs that offer an average yield of 5.8% at recent prices. That means $17,300 spread between them is enough to produce $1,000 in annual dividend income. Here's why they're great options for folks who want passive income they can rely on to grow steadily throughout their retirement years.

1. Realty Income:

Realty Income is a net lease REIT that finished 2024 with 15,621 properties in its portfolio. The vast majority of annual rent it receives comes from retail properties resilient to e-commerce trends, such as convenience stores, dollar stores, and pharmacies. At recent prices, it offers a 5.7% dividend yield.

Realty Income's portfolio is well diversified. Its three largest tenants -- 7-Eleven, Dollar General, and Walgreens -- are responsible for just 10% of total rent.

Troubled businesses like Walgreens illustrate how net lease REITs like Realty Income can produce steady gains for patient investors. The troubled pharmacy chain suspended its dividend this year and will most likely be acquired by a private equity firm. Despite the turmoil, we haven't heard a peep from Realty Income about the pharmacy chain missing any lease payments.

Realty Income offers a monthly dividend payment that has risen steadily since the company's inception in 1969. In March, it raised its monthly dividend for the 130th quarter since becoming a publicly traded business in 1994.

The past decade hasn't been a historically great time to own commercial real estate. By rinsing and repeating its time-tested net lease operation, though, Realty Income has been able to increase its dividend at a 3.9% annual rate since 2015.

At recent prices, Realty Income offers a big 5.7% dividend yield, and steady growth at the usual pace shouldn't be too difficult. The REIT didn't enter the European net lease market until 2019, and this region is still brimming with opportunities. Realty Income and its peers account for less than 0.1% of the addressable market in that region.

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2. W.P. Carey

While Realty Income's dividend has only moved in one direction, W.P. Carey lowered its quarterly payout in 2023 to compensate for the spinoff of its office portfolio as Net Lease Office Properties. Dividend reductions aren't something REIT investors want to see, and they punished the stock severely.

Adjusting its payout 19.7% lower to $0.86 per share in 2023 led to a dramatic stock market beatdown that the diversified net lease REIT hasn't completely recovered from. At recent prices, it offers a big 5.9% dividend yield.

After spinning off its office portfolio, W.P. Carey quickly returned to raising its payout every quarter. The payout investors received in April was 3.5% higher than the one they got a year earlier.

W.P. Carey's 1,555 property portfolio is arguably more diversified than Realty Income's. Its three largest tenants are a self-storage business called Extra Space Storage, a generic drug manufacturer called Apotex, and a business-to-business wholesaler in Italy named Metro. These top three tenants are responsible for just 7.1% of annualized rent.

Sometimes, net lease REITs buy or develop properties first and find tenants later. Mostly, though, they function as lenders through sale-leaseback transactions. By investing in properties that its tenants already use, W.P. Carey's occupancy rate hasn't dipped below 98% since 2011.

Being a big, well-established REIT gives a huge cost advantage to W.P. Carey. During the fourth quarter of 2024, it borrowed 600 million Euros at just 3.7% for 10 years. With access to inexpensive capital and a European market ripe for sale-leaseback financing, there's a good chance this REIT can keep raising its dividend payout throughout your retirement years.

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Cory Renauer has positions in W.P. Carey. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Extra Space Storage. The Motley Fool has a disclosure policy.

Want $1,000 Per Year in Reliable Dividend Income? Invest $17,300 in These 2 High-Yield Dividend Stocks was originally published by The Motley Fool

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