It used to be that owning a house was one of the best investments you could make. While that may not be the case right now, there are still ways to make a profit in real estate.

As the housing market struggles to revive itself, many investors are turning to real-estate investment trusts (REITs) for promising yields. Capping off a 14.9% return so far this year, REITs have maintained a steady pace, marking gains of 8% last year, 28% in 2010 and 29% in 2009.

Thanks to low interest rates, REITs have gained interest among investors as they are required to distribute 90% of their taxable income back to shareholders in the form of dividends.

And because retail has been the best performing REIT sector this year, with average returns of 21.5%, I think retail REITs are a perfect addition to any income-oriented portfolio.

Here are three characteristics you should look for in a retail REIT:

1. High-quality properties located in growth markets. As in any property investment, location and the quality of REIT assets are important. Well-located, prime properties have higher occupancies and command premium lease rates.

2. Manageable debt levels. REITs that rely on excessive debt to pump up returns rarely provide good long-term value. The most consistent returns are generally found in REITs that have more conservative balance sheets. 

3. Sustainable dividend. In REIT investing, the quality of the dividend is everything. A high yield counts for nothing if dividends aren’t sustainable. REITs that have strong tenants committed under long-term leases usually provide more stable income and safer dividends.

These three retail REITs match my criteria, each offering a secure dividend and 4-5% yields.

1. Weingarten Realty Investors (NYSE: WRI)
Yield: 4.5%

Weingarten owns or operates 309 neighborhood and community shopping centers located in 22 states, as well as 73 industrial properties. In addition, the company has a robust development pipeline consisting of 11 retail properties and a  $194 million investment.

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The retail sector has been challenging for many REITs, but Weingarten has maintained exceptional occupancy levels because of its well-located properties.  The company’s retail centers are located in high-income, densely populated metropolitan areas, such as . Portfolio occupancy levels currently exceed 93% and in 25 years have never fallen below 90%.

Weingarten has a solid balance sheet and an investment grade credit rating from Standard & Poor’s and Moody’s. The company is moving forward with plans to divest noncore assets and acquire more supermarkets and necessity-based retail assets. Weingarten recently sold 52 industrial properties for $382.4 million and will use the proceeds to reduce debt and make acquisitions that strengthen its position as a pure-play retail REIT.

Weingarten’s funds from operations (FFO), a REIT metric for earnings, rose 10% to 46 cents in the first-quarter of 2012  from a year earlier. FFO provided five-fold coverage of the dividend. In February, Weingarten hiked its dividend 6% to a 29-cents annualized rate yielding 4.5%. This is well above the 3.5% average yield for the retail REIT sector. 

2. National Retail Properties (NYSE: NNN)
Yield: 5.3%

National Retail specializes in single-tenant retail properties. The advantages of this approach are more properties to choose from, fewer competitors for acquisitions and returns on acquired properties that are well above the industry norm. The company owns 1,486 properties across 47 states and leases space to more than 300 tenants. The average lease term is around 12 years.

Occupancy rates for this REIT’s portfolio exceeded 97% in the first quarter of 2012 and in the past decade have never fallen below 93%. 

National Retail has one of the healthiest balance sheets in the REIT industry with a “BBB” rating from Standard & Poor’s and nearly the full amount available on its $450 million bank line of credit. In addition, the company further strengthened its balance sheet last quarter through a preferred stock offering that raised $287.5 million.

National Retail’s FFO rose 7% to 44 cents in the first quarter of 2012 from 42 cents a year earlier, and the company issued full year guidance for FFO per share ranging between $1.76 and $1.81. This provides ample coverage of the $1.58 annual dividend.  National Retail is one of only four REITs to have increased its dividend 23 years in a row, including a 3% hike in July.

3. Kimco (NYSE: KIM)
Yield: 4%

Kimco is North America’s largest owner of community shopping centers.  The company invests in 930 properties across 44 states and Canada, representing 136.2 million square feet of leasing space. Kimco is also acquiring properties in Latin America and sees strong growth opportunities in that market because of the region’s low penetration of retail centers and rising household income. Kimco leases space to more than 8,500 tenants and has a nice balance between grocery store anchors such as Kroger (NYSE: KR) and big-box retailers such as Home Depot (NYSE: HD) and Wal-Mart (NYSE: WMT). 

Kimco has an investment grade credit rating and a debt-to-equity ratio of 0.88 that is well below the industry average. The company also has plenty of acquisition capacity with $1.4 billion currently available on its $1.75 billion bank line of credit.

Portfolio occupancy was 93% in the first quarter of 2012, which is slightly below the five-year average of 94%, and FFO per share increased by one penny to 31 cents from a year earlier.  Guidance for full-year 2012 FFO per share is in a $1.22 to $1.26 range.

During the recession, Kimco was forced to cut its annual dividend from $1.76 to 24 cents, putting an end to 17 consecutive years of dividend growth. The company resumed growing the dividend in 2010, when dividends rose 13% and 6% the following year to a 76-cents annualized rate. Kimco is keeping payout modest by REIT standards at just 50% of FFO.   

Risks to Consider: Retail REITS face a growing competitive threat from online retailers such as Amazon.com (NYSE: AMZN). Kimco and Weingarten are responding by launching innovative programs to assist tenants with business development.  Investors should note that REIT dividends are taxed as ordinary income, rather than at the lower 15% dividend rate, so it’s best to hold REITs in a tax-advantaged account such as a 401(k) or IRA.

Action to Take — > My top pick for dividend safety is National Retail because of its 23-year track record for dividend growth. Weingarten is also a good choice due to strong FFO coverage of the dividend. Investors looking for dividend growth should consider Kimco because of its foothold in faster-growing Latin American markets.

[Note: If you haven’t already seen it, don’t miss StreetAuthority’s report — “Top 5 Income Stocks for 2012.” These five select investments pay dividend yields of 7.5%… 8.8%… even 11.5%. For more details on these investments, you can visit this link without having to sit through a video presentation.]