Rate Hikes Ending: 7 REITs With Huge Monthly Dividends and Big Upside Potential to Buy Before It Is Too Late

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It has been 18 long months of interest rate hikes, but it is becoming clear that, while painful, the Federal Reserve’s rate hike campaign is working. The good news for investors is that though the Fed probably will not announce a rate hike this week, it is likely it will raise it by 25 basis points once more before the year is out. That could very well be the end of this rate hike cycle. The Fed could just hold rates at the current 5.25% to 5.50% well into next year if the inflation rate moderates further.

Given this, one great investment idea now is real estate investment trusts. REITs are a very practical way to own commercial and residential real estate, and many pay among the best dividends of any asset class. However, most only pay quarterly, or four times a year, so there are at least 90 days between dividends. Since most Americans receive bills that need to be paid monthly, we decided to screen our 24/7 REIT research universe for Buy-rated companies that pay monthly dividends. We found seven that make sense for passive income investors looking for dependable distributions and a degree of safety.

For contrarian investors, REITs may be at the biggest discount in years, after a year and a half of interest rate hikes. While selection is always very important, as this year’s bank issues could crimp lending, the top companies will survive and offer huge total return potential.

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Agree Realty

This top REIT has had a nice run off the lows printed earlier this year and still has potential upside. Agree Realty Corp. (NYSE: ADC) focuses on the ownership, development, acquisition and management of retail properties net leased to national tenants. It specializes in acquiring and developing net-leased retail properties for retail tenants.

The company specializes in the acquisition and development of properties net leased to industry-leading, omnichannel retail tenants. As of December 31, 2022, it owned and operated a portfolio of 1,839 properties, located in all 48 continental states and containing approximately 38.1 million square feet of gross leasable area.

Investors receive a 4.94% distribution. Truist Financial has a $74 target price on Agree Realty stock. The consensus target is $74.58. The stock closed on Tuesday at $58.74.

Apple Hospitality REIT

While not affiliated with the technology giant, this company offers solid total return potential. Apple Hospitality REIT Inc. (NYSE: APLE) owns one of the largest and most diverse portfolios of upscale, rooms-focused hotels in the United States.

Its portfolio consists of 220 hotels with more than 28,900 guest rooms located in 87 markets throughout 37 states, as well as one property leased to third parties. Concentrated with industry-leading brands, the company’s hotel portfolio consists of 97 Marriott-branded hotels, 119 Hilton-branded hotels and four Hyatt-branded hotels.

Apple Hospitality REIT stock comes with a 5.97% distribution. The $18 B. Riley Securities target price is the same as the consensus figure. The closing share price on Tuesday was $15.98.

EPR Properties

This REIT invests in some of the most popular entertainment companies. EPR Properties Inc. (NYSE: EPR) is a leading experiential net lease REIT, specializing in select enduring experiential properties in the real estate industry.

The company is focused on real estate venues that create value by facilitating out-of-home leisure and recreation experiences in which consumers choose to spend their discretionary time and money. It has nearly $6.7 billion in total investments across 44 states. The company adheres to rigorous underwriting and investing criteria centered on key industry-, property- and tenant-level cash flow standards, and it believes its focused approach provides a competitive advantage and the potential for stable and attractive returns.

Investors receive a 7.78% distribution. The JMP Securities target price of $54 compares with a $49.06 consensus target and Tuesday’s closing share price of $42.58 for EPR Properties stock.

Gladstone Commercial

This stock was hit hard as interest rates charged higher and is offering the best entry point in over a year. Gladstone Commercial Corp. (NASDAQ: GOOD) is a top real estate investment trust (REIT) focused on acquiring, owning and operating net leased industrial and office properties across the United States.

As of June 30, 2021, Gladstone owns a diversified portfolio of 121 office and industrial properties located in 27 states and leased to 106 tenants. The company has grown the portfolio in a consistent, disciplined manner at a rate of 18% per year since the IPO in 2003. It matches long-term leased properties with long-term debt to lock in the spread to create a durable, stable cash flow stream to fund monthly distributions to shareholders. Current occupancy stands at 96.5% and occupancy has never dipped below 95.0% since the IPO.

Most importantly for investors, Gladstone has a record of success, as exhibited by a history of strong distribution yields, a consistently strong occupancy rate and more than 10 years of paying monthly cash distributions.

The distribution yield here is 9.16%. B. Riley Securities has set its price target at $15. Gladstone Commercial stock has a $14.50 consensus target, and shares ended Tuesday trading at $13.17 apiece.

Realty Income

This is an ideal stock for growth and income investors looking for a safer, inflation-busting idea. Realty Income Corp. (NYSE: O) is an S&P 500 company dedicated to providing stockholders with dependable monthly income.
Realty Income is structured as a REIT, and its monthly distributions are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with commercial tenants. To date, the company has declared 608 consecutive common stock monthly dividends throughout its 54-year operating history and increased the dividend 109 times since its public listing in 1994. It is a top real estate member of the Dividend Aristocrats index.

Realty Income stock investors receive a 5.72% distribution. Stifel’s $71.25 price target is well above the $53.75 consensus target and the most recent close at $54.00.

SL Green Realty

This is a leading large-cap office REIT that top analysts on Wall Street prefer now, and it is a solid and somewhat contrarian play. SL Green Realty Corp. (NYSE: SLG), Manhattan’s largest office landlord, is a fully integrated REIT focused primarily on acquiring, managing and maximizing value of Manhattan commercial properties.

As of June 30, 2023, SL Green held interests in 60 buildings totaling 33.1 million square feet. This included ownership interests in 28.8 million square feet of Manhattan buildings and 3.4 million square feet securing debt and preferred equity investments.

The distribution yield is 7.86%. SL Green Realty stock has a $48 target price at Piper Sandler. The $34.86 consensus target is less than Tuesday’s close at $40.94.

STAG Industrial

This strong industrial REIT play offers solid upside potential. STAG Industrial Inc. (NYSE: STAG) is a self-managed full-service real estate company primarily focused on the acquisition, ownership and management of single-tenant, Class B warehouses in secondary markets across the United States. The company continues to focus on expansion of its acquisition platform to find acquisitions to grow the portfolio.

Top Wall Street analysts expect management to be aggressive acquirers over time. Additionally, the in-place portfolio should deliver stable organic growth supported by healthy property-level fundamentals.

Investors receive a 4.04% distribution. The Raymond James price objective is $39. The consensus target is $39.30. On Tuesday, STAG Industrial stock closed at $36.28.

All these top REITs are way off the highs printed last year, and they have paid dependable dividends for years. While there are also mortgage REITs that pay monthly dividends, they are more vulnerable to a shake-out in a volatile environment, and we wanted to focus on the companies that had hard assets. It is important to remember that REIT distributions may contain return of principal in their monthly distribution payments.

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