You could be a landlord for Amazon, FedEx, and Walmart with these simple REITs yielding up to 4.4% returns
Being a homeowner is one of the oldest ways to earn income. And these days you don’t have to to buy a house to get a piece of the action.
Learn about real estate investment trusts, which are publicly traded companies that own income-producing real estate.
REITs collect rents from their properties and pass them on to shareholders as dividends. This means investors don’t have to worry about selecting tenants, repairing damages or pursuing late payments. Instead, they just sit back and enjoy the dividend checks are coming when choosing a winning REIT.
Of course, the COVID-19 pandemic has impacted some commercial real estate. And not all REITs are the same. If you are the owner for The e-commerce giant Amazonfor example, you should have no problem receiving a steady stream of rental income.
With that in mind, let’s take a look at two REITs that pay outsized dividends to investors — one of which might be worth investing in with some of your extra cash.
The owner of Amazon
The first is STAG Industrial (STAG), a REIT that owns and operates single-tenant industrial properties across the United States. Its largest tenant is Amazon.
The company’s portfolio consists of 544 buildings totaling approximately 109 million leasable square feet in 40 states.
Note that 459 of the 544 properties are warehouses, which happen to be an essential part of e-commerce.
Additionally, a 2020 tenant survey found that approximately 40% of the REIT’s portfolio manages e-commerce activity.
To see how strong STAG Industrial is, take a look at its dividend history.
Since the company went public in 2011, it has paid a higher dividend each year.
While most dividend-paying companies follow a quarterly distribution schedule, STAG Industrial pays shareholders monthly. The monthly dividend rate is 12.2 cents per share, which translates to an annual yield of 4.4%.
Shares of STAG Industrial are down 7% in the past 12 months.
On March 15, Wells Fargo reiterated an “overweight” rating on STAG Industrial. The company’s price target of $46 implies a 38% upside from current STAG levels.
Owner of Walmart
When it comes to paying monthly dividends, one company stands out above all – Realty Income (O).
Realty Income has paid uninterrupted monthly dividends since its inception in 1969. That’s 623 consecutive monthly dividends paid.
Even better, since the company went public in 1994, it has announced 115 dividend increases.
Realty Income has a diversified portfolio of over 11,000 commercial properties located in all 50 states, Puerto Rico, the United Kingdom and Spain. It leases them to approximately 1,040 different tenants operating in 60 sectors.
This means that even if a tenant or an industry goes into recession, the impact on the company’s finances is likely to be limited.
For example, while Realty Income leases some properties to AMC Theaters — whose business has been impacted by COVID-19 — it also counts Walgreens, FedEx and Walmart among its top tenants. And these companies turned out to be largely pandemic proof.
Earlier this month, the REIT announced a monthly cash dividend of 24.7 cents per share, giving the stock an annual dividend yield of 4.3%.
Investors who hold Realty Income shares for the long term could earn more than just dividends. Morgan Stanley has an “overweight” rating on the company with a price target of $77.
Considering that Realty Income is trading around $69 today, the price target implies a potential upside of 12%.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.