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2 REITs Perfect for Retirees

By Marc Rapport – Updated Dec 27, 2021 at 5:20PM

Key Points

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W.P. Carey and Agree Realty provide payouts and stability.

If your Social Security and pension benefits aren't providing enough retirement income, you might want to look into finding investments that can supply steady income without undue risk and that will help you keep pace with inflation. 

Real estate investment trusts (REITs) can be a good choice here. These are companies that own and/or operate income-producing properties and are required to pay out at least 90% of their taxable income via dividends to shareholders. Their ability to raise the rent helps make them more inflation-resistant than many other investments. But not all REITs are created equal.

Here are two REITs whose past records and current strategies point to their ability to keeping growing their dividend and their share price.

A person at a desk with a calculator and paperwork.

Image source: Getty Images.

W.P. Carey is diverse both geographically and by sector

W.P. Carey (WPC 1.64%) is a large, diversified operation that focuses on buying what it calls "operationally critical," single-tenant properties in North America and Europe.

The New York-based REIT's portfolio is, indeed, diversified. At the end of the third quarter, it included 1,264 net lease properties with about 152 million square feet of space spread among industrial, warehouse, office, retail, and self-storage properties.

Net leases require the tenant to cover expenses such as taxes, insurance, and maintenance. Long-term leases, nearly all with built-in rent increases, add to the income-producing stability of a portfolio that W.P. Carey said is 98.4% occupied. U.S. properties account for about 63% of its business, overall industrial and warehouse account for about 48%, and retail stores account for about 17% of its 358 tenants.

W.P. Carey continues to grow, investing $1.23 billion in its portfolio in the first nine months of 2021 and seeing adjusted funds from operations (AFFO) of $1.24 per share in Q3, up 7.8% from the year-ago number.

And the dividend grew, too, set at $1.055 per share for the fourth quarter, completing two years of quarterly hikes during a global pandemic. The yield sits at about 5.25%.

Agree Realty has a retail portfolio heavy with investment-grade tenants

Agree Realty (ADC 0.49%) not only has a solid record of investor payouts, but it's now paying dividends monthly instead of quarterly, adding to its appeal as an income play.

The dividend of $0.227 per share that the company declared on Dec. 13 raised the annualized payout by 9.8% over last year, an inflation-beating number right there. Long term, Agree Realty has posted a compound average annual total return to shareholders of 13% since its 1994 IPO and has notched compound annualized dividend growth of 5% for the past 10 years.

The suburban Detroit-based REIT generates income from a portfolio that, as of Sept. 30, comprised 28 million square feet of leasable space at 1,338 properties in 47 states.

That included 219 properties it added in 2021, bolstering a portfolio that's more than 99% leased, with an average term of 9.5 years. Plus, 66.9% of annualized base rents come from "investment-grade" retail tenants in sectors including off-price retail, convenience and general merchandise stores, tire and auto service, home improvement, auto parts, and grocery.

Along with $1.07 billion in 2021 year-to-date acquisitions, Agree Realty grew AFFO by more than 40% over 2020, and its stock is yielding about 4%.

They collect the rent while you collect the dividend

It should be noted that both these REITs reported collecting at least 99% of their rent in the past quarter. And while their dividend yields don't equate to the current inflation rate of about 6%, they're respectable and look set to rise.

There are higher dividends available among REITs, but W.P. Carey and Agree Realty carry with them long records of past performance and ongoing portfolio investment that can provide some assurance to retirees of reasonably smooth sailing ahead.

Marc Rapport has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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