They are printing money hand over fist right now, and legally they have to pay out 90% of their earnings to you, the shareholder. There may not be a better time to invest in these three REITs than right now.

In the universe of real estate investment trusts (REITs), the norm for business operations is generating steady revenues and cash flows from owning commercial properties with signed long-term tenant leases. For the typical REIT to grow revenues, cash flows, and dividends, new properties must be acquired. It can be difficult to buy commercial properties with returns that are meaningfully accretive to cash flow per share. One REIT subsector that does not follow this pattern are the lodging/hotel REITs. A hotel company can improve bottom line results with active management strategies and aggressive room pricing.

The hotel sector is closely tied to the cycles in the overall economy. During a recession, hotels have trouble filling rooms and staying profitable. Then as the economy starts to improve business and leisure travel picks up and hotel rooms start to fill. An economic expansion will go for a period of years, and eventually hotels will be close to full and hotel companies will be able to increase room rates. Once hotels are pretty full and room rates are rising, the hotel companies get excited about their profitability and start to build new hotels. The expansion of available room inventory is often timed to match the next slowdown in the economy and just as the new rooms come online, occupancy falls and room rates get slashed. We are back to the bottom of the hotel cycle, ready to start over again.

The current economic expansion has a few differences from the historical norm. The economic growth rate coming out of the 2007-2008 recession has been much slower than the usual recovery path. GDP growth has been in the 2% to 3% annual range compared to a historical average well above 4%. The effect on hotels was that room occupancy and rate increases did not really start to improve profits until about 2013. Also the general fear of a repeat of the Great Recession has kept the hotel companies from building a lot of new properties. As a result, the hotel industry has been doing very well over the last couple of years and there are no reasons to expect that the profit growth will not continue. The hotel REITs have been able to increase their dividend rates by 20% to 100% just in the last year. Growth rates may slow (more on that in a minute) but hotel REIT investors can expect continued dividend growth.