Are you looking for a company that pays a monthly dividend to its investors? While there are many to choose from, American Realty Capital Properties (VER) is one that should be on your list of considerations.
What it does
American Realty Capital Properties is a real estate investment trust, or REIT, that owns a variety of commercial properties across a wide range of industries that are then leased out to tenants through long-term agreements. While ARCP may not be a household name, some of its major tenants assuredly are, including Red Lobster, Walgreens, CVS, Dollar General, FedEx, and many others.
Source: Flickr / JeepersMedia.
It has been on a massive acquisition streak over the last year, as it announced it would be merging Cole Real Estate Investment last October in an $11.2 billion deal. In addition, this May investors learned it had agreed to purchase $1.5 billion worth of Red Lobster properties.
As a result, the company has nearly tripled in size since the beginning of this year (growing from $7.8 billion in assets to $21.3 billion at the end of June), however questions have swirled about its worthiness as an investment, and its stock has lagged the market:
While questions still remain about its future, there are nonetheless two key reasons why you should consider American Realty Capital Properties if you are looking for an investment that pays a monthly dividend.
Key focus on investors
The first reason to consider an investment in ARCP is that management seems to have a key focus on operating with the best interest of shareholders in mind. As fellow Fool Dave Koppenheffer noted, the company states:
Our investment strategy is designed to generate monthly dividends from a durable and predictable level of monthly rents paid by primarily investment grade rated and other credit-worthy tenants and to provide significant growth potential...We intend to pursue an investment strategy that maximizes current cash flow and achieves sustainable long-term growth, thereby enhancing total return for our investors.
In addition, when discussing the massive expansion of ARCP over the last year during the conference call following its second quarter results, its newly named CEO David Kay said:
I could not be more excited about my senior management team and the future prospects of this Company. From afar, it may appear at times our rapid growth is hard to understand. I can assure you, however, that everything we do is directed toward a singular objective: to create value for our shareholders.
While we all know there is a difference between having a goal and being able to execute that goal, it is undoubtedly as encouraging a place as any to start.
Compelling comparisons
Moving to the more quantitative side of things, the next thing worth considering is the reality ARCP compares very favorably to its peers across a variety of key metrics.
As shown below, relative to some of its other commercial net-lease REIT peers, it provides investors with a higher dividend yield and also trades at a significant discount from a valuation standpoint:
Source: American Realty Capital Properties September 2014 Investor Presentation.
In addition to the strong dividend yield and compelling valuation, there is also a lot to like about how its composition of tenants stacks up to its peers.
Its 10 top tenants represent just 31% of the total revenue it receives, versus a peer average of 36%. Not only that, but its average lease is two years longer, and it has the highest concentration of credit-worthy invest-grade tenants at 46%:
Source: American Realty Capital Properties September 2014 Investor Presentation.
In addition to these, and three other reasons why it is a worthwhile investment, all of this is to say, there is a lot to like about it from both the qualitative, and quantitative side of things.
The key takeaway
With all this in mind, if you are in the market for a company which pays a consistent monthly dividend, taking time to consider American Realty Capital Properties would undeniably be a great place to start.
