Investing in great companies and sticking with them is the tried-and-true way to build wealth, and they don't have to be go-go growth stocks.
A great example is Agree Realty (ADC -0.33%), a real estate investment trust (REIT) that makes its money by owning a combination of shopping centers, stand-alone retail buildings, and the land beneath them in the form of ground leases.
The results have been good. Since 2008, a $1,000 investment in this relatively staid real estate play would have grown to $5,785 at this writing.
A nationwide portfolio that's recession-ready
Agree has been a public company since 1994 and has built an impressive record, including a compound average annual return of 12.5% over that time and a portfolio that currently holds 1,839 properties in all 48 continental states.
I chose 2008 for this look at Agree because that was the year the Great Recession took hold and it provides a good measuring stick for how this retail REIT has rolled through that economic disruption and others -- most notably, the pandemic and the e-commerce revolution that battered brick-and-mortar retail.
With talk of another downturn on the way and e-commerce here to stay, Agree's past performance lends its investors confidence in its future, as does its current portfolio with an A-list of investment-grade, recession-ready, and e-commerce resistant tenants such as Kroger, Dollar General, Walmart, Home Depot, and Tractor Supply. Companies like these provide two-thirds of its rent roll.
Charting Agree's short- and long-term success
Wall Street likes this Main Street landlord. First, take a look at how Agree has done in the rocky past year based on share price alone compared with a major REIT index and with the greater market.
Not too shabby. And while that's impressive, check out this chart that shows total return -- which includes capital gains (or losses) and dividend payouts – compared to those two benchmarks since 2008.
ADC Total Return Level data by YCharts
Record investment points to continued payouts
Agree's management -- led by the founder's son in a sign of continuity -- is not sitting still in this roiled market for commercial real estate. The company just reported spending a record $1.71 billion on acquisitions and developments in 2022. The company plans to use its strong liquidity position to continue doing much the same in 2023, backed by a balance sheet and credit rating that should minimize risk.
That kind of growth should translate into continued dividend growth, too, a key factor since this is, after all, an income stock that can be attractive to fixed-income investors because of its monthly payouts.
Agree has posted compound annualized dividend growth of 6.1% over the past 10 years and now pays $0.24 per share per month. That works out to a yield of about 3.9% at a recent share price of about $74. A payout ratio of about 82% based on cash flow from a portfolio that's nearly completely leased out points to continued outperformance.
