It's times like these that try investors' souls, or at least their portfolios. Brutal market conditions brought on by inflation and fears of recession have battered the best-laid plans of even conservative income investors like me.
But that doesn't mean I'm selling off those buy-and-holds that I believe will continue to provide reliable income and return to steady growth in share price, too, as the economy and the market eventually recovers.
My focus also will largely remain on real estate investment trusts (REITs), those pools of income-producing assets that tax law requires to pass at least 90% of their taxable income to shareholders.
Many of these dividend machines have proven the adage that slow but steady wins the race if the finish line means a nice flow of cash that supplements the other eggs in your retirement nest.
Here are three to consider. They're in different industries, and each has been in business since before the turn of the century (remember Y2K? That turn of the century).
They are retail REIT Agree Realty (ADC 1.34%), industrial REIT Prologis (PLD -1.78%), and residential REIT Mid-America Apartment Communities (MAA 0.54%).
The chart below shows that over the past 20 years, not only have these three stocks easily outperformed their peers, as reflected in the CRSP US REIT Index, but to a lesser degree even the broader market represented by the S&P 500.
ADC Total Return Level data by YCharts.
No flash, but plenty of cash
They're hardly flashy outfits, these three. But two of them are the largest of their kind. Prologis has a portfolio of about a billion square feet of logistics warehouse space around the globe and is adding more with its announced acquisition of Duke Realty in a $26 billion megadeal.
In their recent quarterly earnings conference call, Prologis made it clear it sees continued strong demand for logistics warehouse space despite economic tailwinds turning to headwinds for this sector that grew red-hot during the pandemic.
Then there's Mid-America Apartments, with a portfolio of more than 280 apartment communities and 102,000 units that make it America's largest landlord. MAA's properties are nearly all in the Sunbelt and South, where demand and rents are rising, and this kind of business is particularly good.
Last but not least is Agree Realty. While much smaller than the other two, this owner of more than 1,500 shopping centers in 47 states has held steady through ups and downs, including the pandemic's wrath on retail real estate. While its 31 million square feet is minuscule compared with Prologis, Agree is also on the grow, reporting record quarterly investment in new properties last year and then again in the first quarter of this year.
Agreeable performances all around, with more to come
The market has indeed found Agree agreeable. The company's stock is up about 6% so far this year, while MAA and Prologis are both down a more-typical 27% or so. As for yield, Prologis is at about 2.7%, MAA is at about 3%, and Agree is at about 3.8%.
But long-term performance tells us a different story. Over the past 20 years, MAA would have grown a $10,000 stake to about $172,000, a compound annual growth rate (CAGR) in total return of 15%. For Agree, make that about $141,000 and 14%, and for Prologis, a still very respectable $93,000 or so and nearly 12%.
Each of these REITs provides a nice return and has the portfolio and seasoned management in place to continue proving that slow but steady can indeed be a very rewarding pace in this kind of buy-and-hold race.
