Being a homeowner is one of the oldest ways to earn an income. And these days, you don’t have to buy house to get part of the action.
Check out real estate investment trusts, which are publicly traded companies that own income-generating real estate.
REITs collect rent from their properties and pass it on to shareholders as dividends. That means investors don’t have to worry about screening tenants, repairing damage, or chasing late payments. Instead, they simply sit back and enjoy the dividend checks that come in when they pick a winning REIT.
Of course, the COVID-19 pandemic has affected some commercial properties. And not all REITs are created equal. For example, if you’re a landlord for e-commerce giant Amazon, you should have no problem getting a steady stream of rental income.
With that in mind, let’s take a look at two REITs that pay too big a dividend to investors — one that might be worth buying with some of your extra cash.
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The first company was STAG Industrial (STAG), a REIT that owns and operates single-tenant industrial properties across the US Its largest tenant is Amazon.
The company’s portfolio includes 563 buildings with a total of approximately 112 million square feet of rentable space across 41 states.
Note that about 460 of these assets are warehouses, which are an essential part of e-commerce.
Additionally, a 2021 tenant survey found that about 40% of REIT’s portfolio handles e-commerce activity.
To see how solid STAG Industrial is, take a look at its dividend history.
Since the company went public in 2011, it has paid a consistently higher dividend each year.
While most dividend-paying companies follow a quarterly distribution schedule, STAG Industrial pays shareholders dividends on a monthly basis. The monthly dividend rate stands at 12.7 cents per share, which translates to an annual yield of 4.2%.
Shares of STAG Industrial have fallen 18% over the past 12 months.
When it comes to paying out monthly dividends, one company stands out above all – Real Estate Income (O).
Realty Income has paid a constant monthly dividend since its inception in 1969. That is 630 consecutive monthly dividend payments.
Better yet, since the company went public in 1994, the company has announced 118 dividend increases.
Realty Income has a diversified portfolio of more than 11,700 commercial properties in all 50 states, Puerto Rico, the UK and Spain. It leases them to about 1,100 different tenants operating across 79 industries.
This means that even if a single tenant or industry enters a recession, the impact on corporate-level finance is likely to be limited.
For example, while Realty Income leases some properties to AMC Theaters — a business impacted by COVID-19 — the company also has Walgreens, FedEx and Walmart as some of its top tenants. And these businesses turned out to be largely pandemic-proof.
Earlier this month, REIT announced a monthly cash dividend of 24.85 cents per share, giving the stock an annual dividend yield of 4.4%.
Real Estate Income stock is down just 2% over the past year.
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This article is for information only and should not be construed as advice. It is provided without warranty of any kind.