Month-to-month Dividend Inventory In Focus: Agree Realty

Up to date on February twenty fourth, 2023 by Felix Martinez

Actual Property Funding Trusts, or REITs for brief, are a core holding for a lot of revenue buyers as a result of their excessive dividend yields. The coronavirus pandemic was devastating for a lot of REITs, however not all struggled in 2020. Agree Realty (ADC) sailed by means of 2020 with a number of dividend will increase, and the corporate has returned to funds-from-operations progress in 2021 and past.

Agree Realty can be a rarity amongst REITs in that it pays a month-to-month dividend. Month-to-month dividend shares pay shareholders 12 dividends per yr as an alternative of the extra typical quarterly funds.

We created a listing of fifty month-to-month dividend shares (together with necessary monetary metrics equivalent to dividend yields and payout ratios). You may obtain the spreadsheet by clicking on the hyperlink under:

Agree Realty has a 3.9% dividend yield, which is decrease than many different REITs. However excessive high-yielders ought to typically be prevented as a result of such high-yielding shares typically have unsustainable dividends.

Agree Realty’s dividend yield is properly above the S&P 500 common. And it has a excessive stage of dividend security, together with the potential for prime dividend progress within the coming years.

Enterprise Overview

Agree Realty is a retail Actual Property Funding Belief. As of December thirty first, 2022, it owned and operated a portfolio of 1,839 properties positioned in 48 states masking roughly 38.1 million sq. toes of gross leasable space. As of the 2022 fourth quarter, the portfolio was about 99.7% leased and had a weighted common remaining lease time period of roughly 8.8 years. The inventory has a market capitalization above $6.6 billion.

It has a diversified property portfolio, as its high 3 tenants comprise lower than 16.2% of the annual base hire. Properties span plenty of completely different business teams, together with grocery shops, residence enchancment retailers, auto service, and comfort shops.

Supply: Investor Presentation

On the similar time, Agree Realty has high-graded its portfolio by decreasing its publicity to tenant teams most in danger from the present challenges, particularly the coronavirus pandemic. For instance, Agree Realty derives simply 2% of its annual base hire from well being golf equipment and health facilities and simply 1% of ABR from film theaters. In all, Agree Realty generates two-thirds of its ABR from investment-grade tenants.

This portfolio high quality is mirrored within the firm’s robust fundamentals. Agree Realty continues to submit spectacular ends in an especially difficult interval for a lot of REITs, significantly these working within the retail business.

In the latest quarter, adjusted Funds From Operation elevated by 3.9% to $84.4 million. FFO-per-share elevated 4.9% to $0.86 for the quarter, in comparison with final yr’s quarter.

For the total yr of 2022, Adjusted FFO elevated 28.7% to $304 million, whereas on a per-share foundation, adjusted FFO rose 9.1%. Per-share AFFO progress was a lot decrease than total AFFO progress because of the dilutive influence of share issuances. Nonetheless, the corporate has generated robust progress for 2022, even on a per-share foundation.

Development Prospects

Agree Realty grew adjusted funds from operations by a mean of simply over 6% prior to now 5 years. We estimate the belief can proceed rising AFFO on common on the mid-point of 4.5% into 2028. We see Agree Realty with the ability to develop AFFO by means of its three-pronged progress technique revolving round acquisitions, growth, and associate capital options.

As Agree Realty continues to spend money on new properties, future progress is probably going. Agree Realty invested roughly $404.9 million in 131 retail web lease properties within the fourth quarter. Trying again additional, it has invested over $5 billion in properties since 2015.

Supply: Investor Presentation

The corporate lately raised its full-year acquisitions goal to $1.1 billion-$1.3 billion. Lease will increase may even present FFO progress.

Agree Realty, like most REITs, is extremely reliant on the solvency of its tenants, so any headwind or recession throughout the economic system will straight have an effect on it. To fight this, the company emphasizes a balanced portfolio with publicity to counter-cyclical sectors and retailers with stable credit score profiles.

Moreover, they keep away from retailers counting on personal fairness sponsors and like to associate with main operators with robust steadiness sheets.

Dividend Evaluation

Previous to 2021, Agree Realty had paid a quarterly dividend just like the overwhelming majority of dividend shares. However in 2021, the corporate switched to the month-to-month dividend schedule.

Agree Realty presently pays a month-to-month dividend of $0.24 per share. On an annual foundation, the $2.88 dividend payout represents a 3.9% present yield. Contemplating the S&P 500 Index presently yields simply 1.7%, Agree Realty inventory is a gorgeous choice for revenue buyers. And the corporate grows its dividend recurrently. Agree Realty elevated its dividend by roughly 6.8% per yr prior to now 5 years.

The dividend can be extremely safe. Primarily based on the anticipated AFFO of $3.95 in 2023, Agree Realty has a projected dividend payout ratio of 74.9% for all the yr. Agree Realty’s payout ratio has remained extremely constant within the final decade, across the mid–70s, and we see this has very slowly grown to just about 80%. This can be a wholesome payout ratio for a REIT, which should pay out nearly all of its earnings to shareholders.

The corporate operates a wholesome steadiness sheet with a web debt-to-equity ratio of 0.5x, properly under many different REITs. Holding a manageable stage of debt is essential for REITs to maintain the price of capital down. The corporate’s monetary leverage ratio can be low at 1.6x. The corporate maintains investment-grade credit score scores of BBB.

Closing Ideas

Actual Property Funding Trusts are common for his or her excessive dividend yields, however excessive high-yielders ought to be prevented. Buyers shouldn’t ignore REITs with considerably decrease yields, as these REITs typically have superior fundamentals. Agree Realty is an instance of this; though it has a 3.9% yield that trails many different REITs, it makes up for this with a excessive dividend security and progress fee.

In consequence, we view it as a stable decide for revenue buyers, significantly these desirous about dividend progress.

If you’re desirous about discovering extra high-quality dividend progress shares appropriate for long-term funding, the next Positive Dividend databases shall be helpful:

The most important home inventory market indices are one other stable useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month: