Being a landlord is one of the oldest ways to earn an income stream. And these days, you don’t have to buy a house to get a piece of the action.
Check out real estate mutual funds, which are publicly traded companies that own income-producing properties.
REITs collect rent from their properties and pass it on to shareholders in the form of dividends. This means investors don’t have to worry about selecting tenants, repairing damages, or chasing late payments. Instead, they simply sit back and enjoy the dividend checks that come when they pick a winning REIT.
Naturally, the COVID-19 pandemic has taken its toll on some commercial real estate. And not all REITs are created equal. If you’re a landlord for e-commerce giant Amazon, for example, you shouldn’t have a problem reaping a steady stream of rental income.
With that in mind, let’s look at two REITs that pay outsized dividends to investors — one might be worth the launch with some of your extra cash.
Not to be missed
The first is STAG Industrial (STAG), a REIT that owns and operates single-tenant industrial properties throughout the United States. Its main tenant is Amazon.
The company’s portfolio consists of 563 buildings totaling approximately 112 million leasable square feet in 41 states.
Note that around 460 of these properties are warehouses, which are an essential part of e-commerce.
Additionally, a 2020 tenant survey revealed that approximately 40% of the REIT’s portfolio operates e-commerce businesses.
To see just how solid STAG Industrial is, take a look at its dividend history.
Since the company went public in 2011, it has paid a higher dividend every year.
While most dividend paying companies follow a quarterly distribution schedule, STAG Industrial pays shareholders every month. The monthly dividend rate is 12.7 cents per share, which translates into an annual yield of 4.3%.
STAG Industrial shares are down 25% in the past 12 months.
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The landlord of Walmart
When it comes to paying monthly dividends, one company stands out above all: Realty Income (O).
Realty Income has been paying uninterrupted monthly dividends since its founding in 1969. That’s 629 consecutive monthly dividends paid.
Better yet, since the company went public in 1994, it has announced 117 dividend hikes.
Realty Income has a diverse portfolio of over 11,700 commercial properties located in all 50 states, Puerto Rico, the UK and Spain. It leases them to approximately 1,040 different tenants operating across 60 industries.
This means that even if a tenant or industry enters a downturn, the impact on company-wide financials will likely be limited.
For example, while Realty Income leases some properties to AMC Theaters — whose business has been hurt by COVID-19 — it also has Walgreens, FedEx and Walmart as some of its major tenants. And these businesses have proved largely pandemic-proof.
Last month, the REIT announced a monthly cash dividend at 24.8 cents a share, giving the stock an annual dividend yield of 4.6%.
Realty Income stock is down just 5% in the last year.
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This article provides information only and should not be construed as advice. Comes without warranty of any kind.