Investing
With Yields Plunging, 7 REITs That Pay Huge Monthly Dividends Look Tempting Now
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Even though the Federal Reserve has raised interest rates from 0.00% to 4.35% over the past year, longer rates on the 10-year and 30-year benchmark bonds have collapsed. In fact, due to the sharp drop, potential homebuyers have seen the biggest decline in mortgage rates in 14 years. The 30-year U.S. mortgage rate has moved from 7.08% to 6.15% over the past 10 weeks. That is the biggest 10-week drop in rates (almost 1%) since January 2009.
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While great for potential homebuyers, or those looking to refinance, it is not so great for those looking for dependable dividends. The thought of buying a 30-year bond with a puny 3.63% yield does not make sense for growth and income investors looking for yield. One great idea now, especially with the Fed closing in on the end of the rate hikes, is real estate investment trusts. REITs are a very practical way to own commercial and residential real estate, and many pay among the best dividends of any asset class. However, most only pay quarterly, or four times a year, so there are at least 90 days between dividends.
Since most Americans receive bills that need to be paid monthly, we decided to screen our 24/7 REIT research universe for Buy-rated stocks that pay monthly dividends. We found seven that make sense for income investors looking for dependable distributions and a degree of safety. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Agree Realty
This top REIT has had a nice run off the lows printed earlier this month and still has potential upside. Agree Realty Corp. (NYSE: ADC) focuses on the ownership, development, acquisition and management of retail properties net leased to national tenants. It specializes in acquiring and developing net-leased retail properties for retail tenants.
The company specializes in the acquisition and development of properties net leased to industry-leading, omnichannel retail tenants. As of December 31, 2022, it owned and operated a portfolio of 1,839 properties, located in all 48 continental states and containing approximately 38.1 million square feet of gross leasable area.
Agree Realty stock investors receive a 3.90% distribution. Raymond James has a Strong Buy rating to go with its $81 target price. The consensus target is $77.45, and the stock closed on Thursday at $74.36.
24/7 Wall St.EPR Properties
This REIT invests in some of the most popular entertainment companies and pays one of the biggest monthly dividends. EPR Properties Inc. (NYSE: EPR) is a leading experiential net lease REIT, specializing in select enduring experiential properties in the real estate industry.
The company is focused on real estate venues that create value by facilitating out-of-home leisure and recreation experiences in which consumers choose to spend their discretionary time and money. It has nearly $6.7 billion in total investments across 44 states. EPR Properties adheres to rigorous underwriting and investing criteria centered on key industry-, property- and tenant-level cash flow standards, and it believes a very focused approach provides a competitive advantage and the potential for stable and attractive returns.
Shareholders receive a 7.96% distribution. Raymond James has a Strong Buy rating on EPR Properties stock as well. Its $45 target price compares with the $43.71 consensus target and the most recent close at $42.03.
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Gladstone Commercial
This stock was hit hard as interest rates charged higher and now is offering the best entry point in over a year. Gladstone Commercial Corp. (NASDAQ: GOOD) is focused on acquiring, owning and operating net leased industrial and office properties across the United States.
As of June 30, 2021, Gladstone owns a diversified portfolio of 121 office and industrial properties located in 27 states and leased to 106 tenants. The company has grown the portfolio in a consistent, disciplined manner at a rate of 18% per year since the IPO in 2003. It matches long-term leased properties with long-term debt to lock in the spread to create a durable, stable cash flow stream to fund monthly distributions to shareholders. Current occupancy stands at 96.5% and occupancy has never dipped below 95.0% since the IPO.
Most importantly for investors, Gladstone has a track record of success, as exhibited by a history of strong distribution yields, a consistently strong occupancy rate and more than 10 years of paying monthly cash distributions. Gladstone has never skipped, reduced or deferred a distribution since its inception in 2003.
Investors enjoy a 7.22% distribution. The B. Riley Securities price target is $23, and Gladstone Commercial has a $16.76 consensus target. Thursday’s closing share price was $16.50.
LTC Properties
This REIT is focused on a sector that is growing fast as the U.S. population ages. LTC Properties Inc. (NYSE: LTC) invests in seniors housing and health care properties, primarily through sale-leasebacks, mortgage financing, joint-ventures and structured finance solutions, including preferred equity and mezzanine lending.
Its investment portfolio includes 216 properties in 29 states with 32 operating partners. Based on its gross real estate investments, LTC’s investment portfolio is comprised of approximately 50% seniors housing and 50% skilled nursing properties.
Here, the distribution yield is 6.21%. The $47 Berenberg Bank target price is well above the $38.43 consensus target. LTC Properties stock closed on Thursday at $37.30
Realty Income
This is an ideal stock for growth and income investors looking for a safer, inflation-busting idea for 2023. Realty Income Corp. (NYSE: O) is an S&P 500 company dedicated to providing stockholders with dependable monthly income.
The company is structured as a REIT, and its monthly distributions are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with commercial tenants. To date, the company has declared 608 consecutive common stock monthly dividends throughout its 54-year operating history and increased the dividend 109 times since its public listing in 1994. It is a top real estate member of the S&P 500 Dividend Aristocrats index.
Realty Income comes with a 4.44% distribution. Morgan Stanley has set its price target at $74. The $70 consensus target is closer to the $67.97 close on Thursday.
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SL Green Realty
This leading large-cap office REIT is a solid but somewhat contrarian play. SL Green Realty Corp. (NYSE: SLG), Manhattan’s largest office landlord, is a fully integrated REIT focused primarily on acquiring, managing and maximizing value of Manhattan commercial properties.
As of December 31, 2020, it held interests in 88 buildings totaling 38.2 million square feet. This included ownership interests in 28.6 million square feet of Manhattan buildings and 8.7 million square feet securing debt and preferred equity investments.
The company announced this week that it has signed leases totaling 343,186 square feet during the early weeks of 2023. New leases include a 15-year lease with 777 Partners, an alternative investment platform, covering 18,476 square feet on the entire 27th floor at One Madison Avenue.
This follows previously announced new leases with Franklin Templeton, IBM and Chelsea Piers Fitness and increases leased occupancy to 56.6% approximately 10 months prior to the anticipated project completion date.
Shareholders receive an 8.82% distribution. SL Green Realty stock has a $47 target price at Barclays. The consensus target is $40.94, and Thursday’s close was at $37.21.
Stag Industrial
This strong industrial REIT play offers solid upside potential. Stag Industrial Inc. (NYSE: STAG) is a self-managed full-service real estate company primarily focused on the acquisition, ownership and management of single-tenant, Class B warehouses in secondary markets across the United States. The company continues to focus on expansion of its acquisition platform to find acquisitions to grow the portfolio.
Top Wall Street analysts expect management to be aggressive acquirers over time. Additionally, the in-place portfolio should deliver stable organic growth supported by healthy property-level fundamentals.
Investors receive a 4.21% distribution. The Raymond James price objective of $36 is shy of the $36.59 consensus target. Stag Industrial stock ended Thursday trading at $35.52.
All these top REIT stocks are way off the highs printed this time last year, and they have paid dependable dividends for years. While there are also mortgage REITs that pay monthly dividends, they are more vulnerable to a shake-out in a volatile environment, and we wanted to focus on the companies that had hard assets. It is important to remember that REIT distributions may contain return of principal in their monthly distribution payments.
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