I'm on a mission to build my passive income streams to the point where they can cover my recurring expenses. Doing so would give me a lot more financial freedom. I would no longer feel the pressure of having to work to pay the bills.
I make progress toward my goal each month by making investments that generate passive income. High-quality, high-yield dividend stocks are one of my go-to options. This August, I plan to buy more shares of several top-notch dividend stocks, including Mid-America Apartment Communities (MAA 0.39%) and Rexford Industrial Realty (REXR 1.23%).
122 and counting
NYSE: MAA
Key Data Points
Mid-America Apartment Communities, or MAA, is a real estate investment trust (REIT) focused on multifamily properties. The company currently owns nearly 104,000 apartment units across 16 states, predominantly in the Sun Belt region.
The company focuses on markets where jobs and the population are growing at above-average rates, driving demand for housing. That enables the REIT to generate steadily rising rental income to support its dividend, which currently yields around 4%. That's much higher than the S&P 500's 1.3% dividend yield.
The apartment owner has an excellent record of paying dividends. It recently declared its 122nd consecutive quarterly dividend. It has increased its payment for 14 straight years, including by 5% in late 2023.
MAA is in a solid position to continue increasing its dividend. It has a fairly conservative dividend payout ratio for a REIT (around 75% of its adjusted funds from operations [FFO] in 2024). That gives it a solid cushion and allows it to retain cash to invest in expanding its apartment portfolio. The REIT also has a very strong balance sheet with a low 3.7 times leverage ratio, giving it additional flexibility to fund new investments.
The REIT recently bought a newly built 306-unit multifamily community for $81 million that's currently in the lease-up phase. Meanwhile, it's investing over $866 million across seven development projects to add more than 2,600 new apartment units through 2026. The company also plans to start four to six more development projects over the next two years. Along with rising rental income from existing properties, those new additions will help grow its cash flow, which should give it the money to continue increasing its dividend.
Focus is paying dividends
NYSE: REXR
Key Data Points
Rexford Industrial is a REIT focused on logistics properties. It owns 422 properties with about 49.7 million rentable square feet in one market: Southern California. That's the fourth-largest industrial real estate market in the world and consistently has the highest demand with the lowest supply. That keeps occupancy levels high, driving strong rent growth.
Demand for industrial space has been scorching hot over the past few years. That's driving robust earnings growth for Rexford. Its core FFO surged 11.1% to $0.60 per share in the second quarter, driven by a whopping 67.7% increase in rents on new and renewal leases in the period. That easily supported the REIT's $0.4175 per share quarterly dividend (its current yield is over 3%).
Rexford uses its retained cash after paying dividends and a low-leverage balance sheet to continue expanding its portfolio. It spent $1 billion to buy a portfolio of 48 properties from leading private equity fund manager Blackstone earlier this year. With more purchases in the second quarter, the REIT has completed $1.3 billion of acquisitions this year.
The growth from its existing portfolio and new additions put Rexford Industrial in a strong position to continue increasing its high-yielding dividend. The REIT has grown its payout at an impressive 18% compound annual rate over the last five years. It expects embedded rent growth drivers, recently secured acquisitions, and redevelopment projects to boost its net operating income by 35% over the next three years. That gives it a clear line of sight to continue increasing its dividend at a strong rate.
High-yielding and steadily rising income streams
MAA and Rexford Industrial align with my passive income goals. The REITs pay high-yielding dividends supported by growing rental income and strong financial profiles. They also have visible growth prospects, suggesting they should have no trouble increasing their dividends. Therefore, they could supply me with a growing stream of dividend income. That promise of ever-increasing income is why I can't wait to buy more shares of these REITs in August.
