Sometimes the best dividend yields can be found by looking for stocks that few analysts follow. There are dozens of otherwise good quality companies out there which analysts simply don’t talk about, either because the company is too small, too new or occupies a one-of-a-kind niche. Analysts don’t cover these outlier stocks because their large institutional clients prefer investing in recognizable names that have high trading volume and address big markets (which attract lots of competitors).

I decided to investigate the REIT (real-estate investment trust) sector for companies that occupy unique niches and don’t command much attention from analysts. REITs are good for dividend investors in a number of ways, primarily because their unique structure requires them to pass along at least 90% of income directly to shareholders. In return, they are not subject to federal income taxes. Income typically comes from the rent, managing fees and leasing of the properties owned by the trust. Because of this unique structure, REITs generally offer higher yields than the overall market.

I found three unusual REITs that aren’t widely followed by Wall Street, but offer good dividend growth prospects and rich yields.

1. Government Properties Income Trust (NYSE: GOV)
Yield: 7%

This unique REIT primarily owns offices and warehouses that it leases out to the U.S. government and various state government agencies. As of March 2011, Government Properties owned 58 office properties and about 7.1 million square feet of space across 26 states and the District of Columbia.

Government Properties completed its initial public offering (IPO) and paid a dividend of $0.90 per share that year. The REIT increased the dividend by 36% last year to $1.22 and is on track to pay a $1.68 dividend this year — a 38% increase. Funds from operations (FFO), a key REIT performance metric, rose 7% in this year’s first quarter, due to property acquisitions and increased leasing activity. Dividend payout from FFO is average at around 85%, and the REIT’s debt is reasonable at just 21% of capitalization. The outlook for further FFO gains is good, since Government Properties has acquired 11 properties so far this year that should help boost future income and dividends. 

Shares appear reasonably priced at just 14 times trailing 12-month FFO and 1.4 times book value. The share price is up 14% in the past year, but the company’s performance lags the S&P 500’s gain of 22%. This is not uncommon for REITs — it’s just simply the price you pay for stable share prices and steady dividends, but it’s usually a good tradeoff.

2. Getty Realty Corp. (NYSE: GTY)
Yield: 8%

Getty Realty specializes in an unusual real estate niche — convenience stores and gas stations. The company owns and leases about 1,170 convenience store/gas stations nationwide. These properties are operated under the Getty, BP, Exxon, Mobil, Shell, Chevron, Valero, Fina and Aloha brands.

Getty Realty has grown dividends for five years in a row to a current annual rate of $1.92 per share. FFO per share, adjusted for non-cash acquisition charges, totaled $2.04 in the last 12 months and adequately covered quarterly dividend payments.

Getty Realty raised $92 million through an equity offering in the first quarter of 2011 and used the proceeds to help finance the purchase of 125 gas stations near New York City and around Boston. These acquisitions should help diversify the tenant mix and solidify FFO growth.

Getty Realty shares trade for only 12 times trailing FFO and two times book value. The dividend yield is generous at 7.8% and the debt level, which is at about 40% of capitalization, is manageable.

Getty Realty’s valuation is modest because shares fell nearly 25% in March when Lukoil, one of the largest Russian oil companies, announced it was transferring its ownership interest in Getty Petroleum Marketing to Cambridge Petroleum. Getty Petroleum Marketing was the REIT’s largest tenant. Uncertainty about its ongoing relationship with the new tenant creates a risk, but I think most of the downside is already factored into the current share price. 

3. Whitestone REIT (AMEX: WSR)
Forward yield: 9%

Whitestone REIT went public in August 2010 and invests in what it calls “Community Center Properties” — i.e., prominent, visibly-located properties in established or developing culturally-diverse neighborhoods. These niche properties are smaller, but typically deliver higher rents (and returns) than larger spaces. The REIT owns 39 properties and 3.2 million square feet of leasable space in Houston, Dallas, San Antonio, Phoenix and Chicago.

Whitestone has been busy this past year acquiring properties, including three Phoenix-area properties purchased at big discounts to their replacement value. The REIT raised $60 million through a May equity offering and plans to use the proceeds for more acquisitions.

Whitestone pays dividends monthly at an annualized rate of $1.14. Payout is high, at 96% of FFO, but the REIT’s income increased 8% in this year’s first quarter and should continue to grow if the economy strengthens and new properties are added to the bottom line. Debt is manageable at 44% of capitalization.

Whitestone’s shares are valued at just nine times 2010’s FFO and at 1.2 times book value. Whitestone’s share price has risen only about 10% since the August IPO, but the REIT’s forward yield based on the new $0.29 quarterly dividend rate is a generous 9%.

Action to take–> My top choice for conservative investors is Government Properties. This REIT is the largest of the three ($1 billion-plus market capitalization), has the safest dividend and is building an impressive track record for dividend increases. More aggressive investors may want to put a stake in Getty Realty, which offers the potential for strong share price gains if the negotiated agreement with the new tenant favors the REIT. Whitestone offers a balance between the two, with a high dividend yield and moderate share price appreciation potential.

P.S. — If you’re an income investor, why would you buy a stock yielding 2% when you can find one paying 26% right here? Watch this presentation for more.