Updated on August 22nd, 2024 by Bob Ciura
Real Estate Investment Trusts, or REITs for short, are a core holding for many income investors due to their high dividend yields.
At the same time, monthly dividend stocks are also appealing for income investors, due to their more frequent payout schedules.
Agree Realty (ADC) is a rarity among REITs, in that it pays a monthly dividend. Monthly dividend stocks pay shareholders 12 dividends per year instead of the more typical quarterly payments.
We created a list of 79 monthly dividend stocks (along with important financial metrics such as dividend yields and payout ratios). You can download the monthly dividend stocks spreadsheet by clicking on the link below:
Agree Realty has a 4.1% dividend yield, which is more than three times the average dividend yield of the S&P 500 Index.
And, Agree Realty has a high level of dividend safety, along with the potential for dividend growth in the coming years. This article discusses ADC in greater detail.
Business Overview
Agree Realty is a retail Real Estate Investment Trust. Agree has developed over 40 community shopping centers throughout the Midwestern and Southeastern United States.
As of June 30, 2024, the property portfolio consisted of 2,202 properties located in 49 states, and contained approximately 45.8 million square feet of gross leasable area.
At the end of the 2024 second quarter, Agree’s portfolio was 99.8% leased, and a weighted-average remaining lease term of approximately 8.1 years.
Just over two-thirds of annualized base rent comes from investment-grade retail tenants.
It has a diversified property portfolio, spanning a number of different industry groups, including grocery stores, home improvement retailers, auto service, and convenience stores.
Source: Investor Presentation
At the same time, Agree Realty has high-graded its portfolio by reducing its exposure to tenant groups most at risk from the current challenges, specifically the coronavirus pandemic.
For example, Agree Realty derives just 2% of its annual base rent from health clubs and fitness centers and just 1% of ABR from movie theaters. In all, Agree Realty generates two-thirds of its ABR from investment-grade tenants.
This portfolio quality is reflected in the company’s strong fundamentals. Agree Realty continues to post impressive results in an extremely challenging period for many REITs, particularly those operating in the retail industry.
In the most recent quarter, net income per share for the quarter rose by 25.6% year-over-year to $0.52, and adjusted funds from operations (AFFO) per share increased by 6.4% to $1.04.
The company also declared a monthly dividend of $0.250 per common share, marking a 2.9% year-over-year increase. Additionally, a $450 million bond offering was completed, contributing to a robust liquidity position of $1.7 billion.
For the first half of 2024, Agree Realty demonstrated consistent growth, with net income per share increasing by 11.3% to $0.95. AFFO per share rose by 5.5% year-over-year, to $2.07.
Growth Prospects
Agree Realty has grown AFFO by a compound rate of 6.8% over the past ten years. AFFO has increased by 5.8% per year over the past five years.
We expect that Agree Realty will continue to grow but at a slightly slower pace of 4.0% annually for the next five years. Current growth prospects stem from the recent acquisitions announced for the year.
We see Agree Realty being able to grow AFFO through its three-pronged growth strategy revolving around acquisitions, development, and partner capital solutions.
During the first half of 2024, Agree Realty invested $343 million in 102 retail net lease properties, and committed over $101 million to 25 development projects.
Looking back further, it has invested over $9 billion in properties since 2010.
Source: Investor Presentation
Looking ahead, Agree Realty raised its 2024 AFFO per share guidance to a range of $4.11 to $4.14 and increased its
acquisition guidance to approximately $700 million.
We expect ADC to generate 4.0% compound annual growth of FFO-per-share over the next five years.
Dividend Analysis
Prior to 2021, Agree Realty had paid a quarterly dividend like the vast majority of dividend stocks. But in 2021, the company switched to a monthly dividend schedule.
Agree Realty currently pays a monthly dividend of $0.25 per share. On an annual basis, the $3.00 dividend payout represents a 4.1% current yield.
Considering the S&P 500 Index currently yields just 1.3%, Agree Realty stock is an attractive option for income investors.
And, the company grows its dividend regularly. Agree Realty increased its dividend by approximately 5.9% per year in the past 10 years.
The dividend is also highly secure. Based on the expected AFFO of $4.09 for 2024, Agree Realty has a projected dividend payout ratio of 73% for the entire year.
Agree Realty’s payout ratio has remained highly consistent in the last decade, around the mid–70s. This is a healthy payout ratio for a REIT, which must pay out the majority of its earnings to shareholders.
The company operates a healthy balance sheet with a net debt-to-equity ratio of 0.5x, well below many other REITs. Keeping a manageable level of debt is very important for REITs to keep the cost of capital down.
The company maintains investment-grade credit ratings of BBB+.
Final Thoughts
Real Estate Investment Trusts are popular for their high dividend yields, but extreme high-yielders should be avoided. Investors should not ignore REITs with somewhat lower yields, as these REITs often have superior fundamentals.
Agree Realty is an example of this; although it has a 4.1% yield that trails many other REITs, it makes up for this with a high dividend safety and growth rate.
As a result, we view it as a solid pick for income investors, particularly those interested in dividend growth.
Don’t miss the resources below for more monthly dividend stock investing research.
- 20 Highest Yielding Monthly Dividend Stocks
- 10 Cheapest Monthly Dividend Stocks
- 10 Safest Monthly Dividend Stocks
- 3 Top ‘Hold Forever’ Monthly Dividend Stocks
And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.
- Dividend Kings: 50+ years of rising dividends
- Dividend Champions: 25+ years of rising dividends
- Dividend Aristocrats: 25+ years of rising dividends and in the S&P 500
- Dividend Achievers: 10+ years of rising dividends and in the NASDAQ
- High Dividend Stocks: 5%+ dividend yields
- Blue Chip Stock: Kings, Aristocrats, and Achievers
- MLPs: List of MLPs and more
- REITs: List of REITs and more
- BDCs: List of BDCs and more