Hundreds of companies pay a dividend. That gives income-seeking investors a multitude of options. Because of that, it can be easy to overlook some excellent income-generating opportunities.
Three rock-solid dividend stocks that don't get the attention they deserve are Agree Realty (ADC 1.16%), Crestwood Equity Partners (CEQP), and Iron Mountain (IRM 0.99%).
1. Rock solid retail real estate
Agree Realty is a real estate investment trust (REIT) focused on the retail sector. It has quietly put together an excellent dividend track record. The company has delivered 5.5% annualized dividend growth over the last decade. It currently makes monthly dividend payments and yields 3.5%, making it ideal for those seeking passive income.
That high-yielding payout is on a firm foundation. It all starts with Agree Realty's portfolio. It focuses on owning freestanding properties triple net leased (NNN) to retailers insulated from the threat of e-commerce and the impact of economic downturns. It also has a significant ground lease portfolio. Top tenants include tire and auto service centers, grocery stores, home improvement stores, pharmacies, and auto part stores. Those leases provide the company with a very stable rental income. Meanwhile, it has a high-quality tenant portfolio, with 68% having investment-grade credit ratings.
Agree Realty complements its durable real estate portfolio with a strong financial profile. It has a conservative dividend payout ratio (72% of its funds from operations in the second quarter) and an investment-grade balance sheet with a low leverage ratio. That gives it the financial flexibility to continue acquiring income-producing real estate, enabling it to keep growing its dividend.
2. Plenty of fuel to distribute cash to investors
Crestwood Equity Partners is a master limited partnership (MLP) focused on gathering and processing natural gas. The company generates lots of recurring cash flow backed by long-term contracts. That gives it the funds to pay a hefty distribution to investors that currently yields an eye-popping 9.7%.
The MLP expects to generate enough cash to cover its payout by at least two times this year. That will provide it with enough money to fund its $220 million to $240 million expansion program with $5 million to $45 million to spare. This excess cash will help strengthen its already solid balance sheet.
Crestwood expects to generate significantly more free cash flow next year as its current slate of expansion projects comes online and investment spending tapers off. That should enable the company to achieve its long-term leverage target, giving it more money to return to investors.
3. Producing a mountain of recurring cash flow
Iron Mountain is a specialty REIT focused on storing physical items like files and valuables in secured warehouses and data in data centers. The company generates recurring rental income from tenants. In addition, it earns service revenue by helping clients with digital transformation initiatives, information management, and secure document destruction.
The company uses its recurring income to pay an attractive dividend -- it currently yields 4.5% -- and invest in growing its data center platform. Its dividend payout ratio is approaching its long-term target ratio in the low-to-mid 60% range. Meanwhile, leverage is at the top end of its long-term target range. These factors give Iron Mountain an ironclad dividend.
The REIT expects its data center investments to pay dividends in the coming years. It currently has 179.8 megawatts (MW) of leasable capacity, another 185.7 MW under construction, and a further 247.9 MW held for development. As more data storage capacity comes online, it should grow Iron Mountain's cash flow, enabling it to increase its dividend.
High-quality high-yielding dividends
Agree Realty, Crestwood Equity Partners, and Iron Mountain aren't well-known names to most investors. Because of that, investors are missing out on their rock-solid dividends. The trio offers high-yielding payouts supported by recurring cash flows and strong financial profiles that they should be able to grow in the coming years. That makes them ideal for those seeking to generate passive income.
