Real estate investment trusts (REITs) were created about 60 years ago as a way for regular investors to own real estate without the big expense of buying it directly or the hassle of property management.
There now are about 225 publicly traded REITs covering pretty much every real estate market sector. They're all required to pay out at least 90% of their taxable income as dividends, and many have established enviable records as dividend machines, providing regular income to go along with capital appreciation.
Among that group are a handful that pay dividends monthly, adding regular cash flow that might particularly appeal to retirees on Social Security and others who are used to budgeting by the month instead of the quarter as much as possible.
Three to consider here are Stag Industrial (STAG 0.16%), Realty Income (O 0.29%), and Agree Realty (ADC 0.80%). Agree Realty and Realty Income have been building sterling records for total return for three decades, while Stag went public in April 2011. This chart shows how these three REITs have performed against each other and the benchmark Vanguard Real Estate ETF since Stag's initial public offering (IPO) in April of that year.
STAG Total Return Level data by YCharts
Realty Income
Proclaiming itself "The Monthly Dividend Company," Realty Income is the gold standard for REITs paying either monthly or quarterly. This super-popular trust owns more than 12,200 properties in all 50 U.S. states, Puerto Rico, the U.K., Spain, and Italy, and it has paid dividends for 634 straight months. That's while bumping up its payout 120 times since going public in 1994.
NYSE: O
Key Data Points
Although Realty Income is primarily a retail REIT, this is a diverse portfolio of more than 1,240 different clients in 84 industries. Grocery stores lead the list with 10% of the rent roll, while the single largest tenant is Dollar General. The trust has recently branched out into casinos and even vertical farming.
Agree Realty
Agree Realty is also a retail REIT, but a much smaller one, with a portfolio of 1,839 properties across the country. But it's highly regarded by retail and institutional investors alike, thanks in no small part to increasing its dividend by an average of 6.1% a year for the past 10 years and posting a compound average annual return of 12.5% since its 1994 IPO.
NYSE: ADC
Key Data Points
Although Agree is strictly focused on retail properties, its client list is heavily investment-grade and recession-resistant, with Walmart leading the list at 6.9% of the trust's current rental income. And, as with Realty Income, grocery stores lead the Agree industry list, accounting for 9.4% of its income.
Stag Industrial
Stag Industrial is the relative newcomer on this list, but it's in a hot sector. This industrial REIT owns a collection of 563 warehouses and factories in 41 states. It also has a broad client list that includes manufacturers, distributors, and brand-name logistics operators. Its 20 largest tenants account for only 17% of its current rent flow, led by Amazon at 3%.
NYSE: STAG
Key Data Points
Stag has raised its monthly payout for five straight years and has easily beaten the broad market (as represented by the S&P 500) since it began trading in 2011. This trust's properties also stay nearly full, with long-term leases that typically include escalator clauses and large rent increases when leases are renewed or turned over.
A close call, but the nod goes to Agree
These REITs all yield are roughly the same, bouncing around 4% and 5%, and any or all would make fine additions to a monthly income-focused portion of a long-term investor's portfolio.
I own all three, but if asked to choose just one, I'd go right now with Agree. Industrial properties are certainly in favor now, and they may stay that way for a long time, but groceries will always be in demand.
That said, Agree and Realty Income both have rock-solid balance sheets, proven management and strategies, and all-star portfolios of reliable rent payers. But Agree is smaller and can move the income growth needle more easily than the relative Goliath that Realty Income has become.
