If you're investing for income, then you'll love owning a few stocks that put cash in your bank account each month. Realty Income (O +0.70%), Vermillion Energy (VET 7.87%), and STAG Industrials (STAG +2.40%) are three such businesses. Here's the bull case for owning each so you can decide if any of them are deserve a place in your portfolio.
A monthly dividend champion
Realty Income is appropriately named. This real estate investment trust (REIT) has been making a monthly dividend payment to its investors for nearly 47 years in a row. That's a track record few other businesses can claim.
Realty Income owns and manages more than 5,000 freestanding retail properties in 49 U.S. states. The company's buildings are rented out to a diversified group of tenants under long-term net lease agreements. This approach provides the company with a predictable stream of recurring monthly revenue that it passes along to its investors in the form of an ever-growing monthly dividend check.
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While owning retail properties might sound risky in today's e-commerce-driven world, Realty Income protects itself by being highly selective with its tenants. The company rents primarily to businesses that are relatively immune to online competition or economic downturns -- think drugstores, fitness centers, or deep-discount retailers. This selectivity helps keep the company's occupancy rates very high even during periods of economic stress. That's a big reason this company's dividend payment is so predictable.
Despite boasting a long history of success, shares of Realty Income have declined lately over concerns about rising interest rates and a general slowdown in retail spending. The drop has pushed the company's generous dividend yield up to 4.7%. Given the predictable business model, I think right now might be a good time to consider buying a few shares of this dividend all-star.
Canada's energy darling
Vermillion Energy is a Canadian-based energy producer that buys oil and gas assets in politically stable regions of the world. Currently, the company's properties are located in the U.S., Canada, Ireland, France, Germany, and Australia. Vermillion's management team believes that operating in stable regions helps reduce its risk profile and keep the profits flowing even when there's political unrest.
While the company's conservative practices have worked out beautifully over the long term, Vermillion isn't immune to the energy cycle. However, even though the recent downturn took its toll on the company's profits, Vermillion never cut its dividend. That's an attribute that very few oil producers can claim, and it shows that Vermillion's safety-first approach has value.
Vermillion looks built for growth. The company's management team chose to invest right through the recent downturn, which means it has a lot of assets that should be coming online over the next few years. That could coincide perfectly with a rise in energy prices, which would position the company well for strong profit growth. And that means the company's dividend is poised for substantial growth. Shares currently yield 5.4%.
A back-door play on e-commerce
Growing online competition is forcing some retailers to close stores and reinvest in their own e-commerce capabilities. That means they'll be on the hunt for industrial properties to quickly serve online shoppers from coast to coast. One company that looks well positioned to benefit from that trend is STAG Industrials.
This is a REIT with an interesting twist. The company is focused on buying commercial real estate properties in secondary markets that house only a single tenant. This is a very risky strategy at the individual property level, since a large building can become vacant in a flash. However, STAG mitigates the risk by owning hundreds of properties that are leased under long-term contracts. That helps keep its occupancy rates high and its portfolio risk level low.
One big benefit of investing in higher-risk assets is that competition is sparse. That helps keep prices in check and allows STAG to buy properties that offer high rates of return, which in turn have allowed STAG to grow its portfolio assets rapidly. The result has been, not only higher profit and a bigger dividend, but also significant share-price appreciation.
While STAG's stock has been rallying recently, its dividend yield is still a very tempting 5.3%. With the e-commerce trend at its back and a winning business model in place, STAG looks well positioned to keep on delivering for investors.
