Jan 11, 2024
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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 investment trusts, which are publicly traded companies that own income-producing real estate.
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REITs collect rent from their properties and pass it along to shareholders in the form of dividends. That means investors don’t have to worry about screening tenants, fixing damages or chasing down late payments. Instead, they simply sit back and enjoy the dividend checks rolling in when they pick a winning REIT.
Of course, the COVID-19 pandemic did impact some commercial real estate. And not all REITs are the same. If you are a landlord for e-commerce giant Amazon, for instance, you should have no problem collecting a steady stream of rental income.
With that in mind, let’s take a look at two REITs paying oversized dividends to investors — one could be worth pouncing on with some of your extra cash.
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Amazon’s landlord
The first one is STAG Industrial (STAG), a REIT that owns and operates single-tenant industrial properties throughout the U.S. Its biggest tenant is Amazon.
The company’s portfolio consists of 563 buildings totaling approximately 112 million rentable square feet across 41 states.
Note that about 460 of those properties are warehouses, which happen to be an essential part of e-commerce.
Moreover, a tenant survey in 2021 revealed that around 40% of the REIT’s portfolio handles e-commerce activity.
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To see how solid STAG Industrial is, take a look at its dividend history.
Since the company went public in 2011, it has paid higher regular dividends every single year.
While most dividend-paying companies follow a quarterly distribution schedule, STAG Industrial pays shareholders every month. As of October 2023, the monthly dividend rate stands at 12.25 cents per share, which translates to an annual yield of 4.32%.
Read more: Unlocking financial prosperity: Jeff Bezos shares the path to prime earnings through hassle-free real estate investment — don't miss out on this opportunity to revolutionize your financial future
Walmart’s landlord
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 over 630 consecutive monthly dividends paid.
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Better yet, since the company went public in 1994, it has announced 118 dividend increases.
Realty Income has a diverse portfolio of over 11,700 commercial properties located in all 50 states, Puerto Rico, the U.K. and Spain. It leases them to around 1,100 different tenants operating across 79 industries.
This means even if one tenant or industry enters a downturn, the impact on company-level financials will likely be limited.
For instance, while Realty Income rents some properties to AMC Theaters — whose business was hurt by COVID-19 — it also has Walgreens, FedEx and Walmart as some of its top tenants. And these businesses turned out to be largely pandemic-proof.
As of November 2023, the REIT announced a monthly cash dividend to of 26 cents per share, giving the stock an annual dividend yield of 5.71%.
Realty Income shares are down just 7% over the past year.
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Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
