My colleague David Sterman recently highlighted an interesting company called Equinix (Nasdaq: EQIX), which owns facilities that house Internet traffic equipment. That may not sound interesting by itself, but it was a rather unusual move the company recently made that caught my attention.

Equinix decided to become a real estate investment trust (REIT), which offers significant advantages for companies that own a lot of real estate. And it’s also creating opportunity for income investors.

Lured by outsized returns in the REIT sector, a number of companies that own significant amounts of real estate are taking the plunge and converting to REITs. This benefits income investors primarily because of the unique REIT structure, which requires these firms to pass along at least 90% of their income directly to shareholders in the form of dividend payments. By doing so, REITs bypass federal taxes and the result is that REIT dividends are only taxed at the individual level of shareholders.

Because of this unique structure, REITs can generally offer much richer yields than the overall market.#-ad_banner-#

Most REITs own traditional types of real estate such as shopping centers, apartments and office buildings, but an increasing number of companies that own different types of properties are converting to REITs.

Investors who purchased Equinix shares last September, when the board of directors approved the plan to become a REIT, are sitting on a 13% capital gain right now. Investors drove up the share price knowing that lower taxes would leave Equinix with more money to distribute to shareholders.

Several firms are following Equinix’s lead and hoping to lock in similar gains through a REIT conversion. One way investors can play this trend by identifying these companies during the conversion process and taking advantage of a special one-time dividend these companies must pay before the change to REIT status.

Here is a look at four recent or upcoming REIT conversions.

1. Corrections Corp. of America

Corrections Corp. of America (NYSE: CXW) converted to a REIT effective Jan. 1. Corrections Corp. is the nation’s largest operator of private prisons. The company operates 66 correctional and detention facilities, and has a total capacity of about 91,000 beds in 20 states and the District of Columbia. Correction Corp.’s funds from operations (FFO) per share, a key REIT cash flow metric, grew 7% to $2.34 in 2012 from $2.19 a year earlier. Growth came from opening a new prison in Georgia, and new or expanded contracts with government agencies in Puerto Rico, Idaho, Colorado and Oklahoma. Corrections Corp. has provided guidance for a 16% rise in 2013 FFO per share to between $2.72 and $2.87. Some of this growth will likely come from a one-time tax benefit of between $115 million and $135 million from converting to a REIT. Corrections Corp. plans to pay quarterly dividends at an annualized per-share rate of $2.04 to $2.16 this year. At the mid-point of this range, shares yield almost 2%. In addition, the company will pay a special one-time dividend of at least $650 million to investors during 2013. The special dividend will be a combination of cash and stock.

2. Geo Group

Geo Group (NYSE: GEO) is the second-largest prison operator, Geo Group, also recently converted to a REIT. Geo’s operations include 101 correctional, detention and community re-entry facilities; and 73,000 owned or managed beds. Geo’s FFO has grown on average 17% in each of the past five years, and the company estimates 2012 FFO per share is expected to be at least 8% higher than last year at between $3.44 and $3.60. However, management has said that 2013 FFO per share will be roughly 5% lower because of the sale of the company’s health care facility operations, which was required for the REIT conversion. Geo paid a special one-time dividend of $5.68 per share to investors last December that consisted of an 80/20 mix of stock and cash. The company is slated to pay its first quarterly dividend as a REIT in March at an annualized rate of $2 per share yielding a healthy 5.9%.

3. American Tower

American Tower (NYSE: AMT) is the leading provider of wireless tower services. Since becoming a REIT in November 2011, American Tower has seen its share price rise 32%. The company operates more than 50,000 communication towers in the United States and is also expanding internationally. American Tower delivered 17% FFO per share growth to $2.28 during the first nine months of 2012 and analysts predict at least 15% growth this year. Like other cell tower operators, American Tower is benefiting from growth in the number of wireless subscribers and carriers building out their networks. American Tower pays dividends quarterly at an annualized rate of 96 cents a share. The current yield is somewhat meager at 1.3%, but this REIT’s rapid growth should enable healthy hikes in the dividend.

4. SBA Communications

American Tower’s smaller rival, SBA Communications (Nasdaq: SBAC), is setting the stage for a REIT conversion and is already reporting REIT-style FFO alongside its usual operating results. SBA owns and operates more than 16,500 towers across the Americas and recently launched operations in Brazil by acquiring 800 towers in that market. SBA grew its FFO 49% during the third quarter of 2012 to $93.1 million from one year earlier. Management projects full-year 2012 FFO of $371.4 million and FFO rising 23% in 2013 to $456 million. As a rule of thumb, tower companies wait until accumulated net operating losses (NOLs) that allow them to shield their income from taxes expire before converting to REITs. SBA has about $1.8 billion of NOLs to work through, so it could be a few years before this company completes the change to REIT status. At present, SBA doesn’t pay a dividend.

Risks to Consider: The two prison REITs lease their facilities to federal, state and local agencies, including the Federal Bureau of Prisons, and are thus reliant on government funding to pay their bills. State and local agencies can be notoriously slow payers and in the past Corrections Corp has received IOUs instead of cash from the state of California.

Action to Take –> My top pick overall is American Tower because of the REIT’s healthy growth, which fuels strong prospects for a rising dividend. I also like Geo Group for its consistent FFO growth and generous yield. SBA Communications is a pure play on a REIT conversion. Purchasing shares now could position investors for capital gains and a sizable one-time special dividend down the road.

P.S. — Companies with a lot of real estate assets aren’t the only ones sitting on a pile of cash and waiting to pass it along to shareholders. In fact, we’ve identified a select group of companies that are sitting at the top of a $1.7 trillion “Dividend Vault” that we think will be ready to shower investors with dividends very soon. To learn more, watch this special presentation.