My two largest current REIT positions are in two monthly payout companies. I think both are “cheap” for what they offer investors. Both are rated investment grade or above (high IG). Both yield more than 4%, Even considering certificates of deposit and other riskier investments, they are attractive.
However, I maintain that Realty Income (O) and the other REITs I own here are very, very solid investments.
The company I’m talking about is Agree Realty (NYSE: ADC). In many ways, it could be considered O’s “little brother,” but without some of the risk profile, scale and international diversification that O possesses. These are obviously both pros and cons, as such companies are not uncommon.
In this article, I will show you why Over 3% of my private portfolio and 3.9% of my commercial portfolio are invested in ADCs.
Agree Realty – Very good monthly salary.
A monthly salary is something I’m actively looking for.Not because I only focus on dividends but because in my experience companies that do pay dividends monthly but most importantly well managedoften outperforming the broader market.
The same is true for Agree Realty.
The company’s five-year total shareholder return was 73.8%.which means you can only Invest in ADCs and you will outperform the market. The annualized return since the 1994 IPO is 12.3%, another all-time high. Over the past decade or so, the company has compounded its dividend by 6.1%.
There’s a lot to like about ADC.
From its BBB rating, to paying a 4.4%+ monthly yield, to the fact that it’s not over- or heavily invested in any empirically cyclical sectors. The company has “age” – it’s been around since the early ’70s, with more than 1,900 properties, and its later highlights include a range of attractive qualities that say “yes, Agree Realty is doing really well” .
I want you to note that recurring EBITDA is below 4x net debt (even on a pro forma basis) as this is one of the better ratings in the entire industry – triple net of course. The company has a portfolio of operating assets that would be the envy of any other REIT. More than 10% of grocery, nearly 10% of home improvement, and other industries are either resilient, immune to or part of the e-commerce trend.
More than 65% of corporate tenants are investment grade and only 16% are sub-investment grade. Eighty-seven percent of the company’s tenants are so-called national industry leaders, and less than 2 percent of the company’s portfolio is franchised restaurants like Burger King, Taco Bell or Wendy’s. Not that there’s anything bad about these – but Lowe’s (LOW) is clearly better.
The company also has a growing number of ground leases at 12.1% of ABR with WALT over 11 years – most ground lease tenants are home improvement, pharmacy-like businesses. I’m also happy to see that exposure to pharmacies like CVS is very low – as I might consider these to be riskier investments in the current circumstances. In these respects, land lease value creation is noteworthy, an example of which can be found here.
The investment priorities of different REITs have varied over the past few years. So what exactly is ADC focusing on that makes it such a great prospect in my eyes?
Well, what I value here is the company’s focus on omnichannel, e-commerce-resistant customers, preferably recession-resistant to business strategies. The firm also completely avoids any private equity partners or retailer sponsorships, which would mess with the risk/reward ratio. Clearly, ADC wants strong real estate fundamentals and good construction, but any REIT focused on Grade C or D real estate right now doesn’t even have a spot on my survey list.
The fact that the company has been able to acquire close to $6B since 2018, with our $60B being reviewed at a “percent change” of 10%, means that not only is there still quality movers/players like this in this market space ADCs, but they are also very selective. Despite the current dislocation in real estate, there is active and robust investment activity underlying the current market – dominated by acquisitions rather than development – but it is still significant and increasing until 2022.
Like any quality REIT, ADC is aggressive in recycling, divestitures, and dispositions as necessary — nearly $500 million in disposals between 2010 and 2022, along with constant acquisitions.What I find interesting in their disposition is that ADC seems to be one of them very early player target disposition Walgreens (WBA). Even earlier than before I was negative about the company. I can’t help but believe that the company saw what happened to the WBA and acted accordingly – that’s impressive. I also like that they continue to dispose of franchise stores/brands as they have less security compared to Lowe’s.
The company’s balance sheet fundamentals are absolutely ironclad.There’s actually no expiration date worth mentioning happening Until 2028. Well, if you count two $50 million worth of unsecured funds, one is -25 and the other is -27, but otherwise everything is 2028 and beyond. This is one of the best debt ladders I’ve seen among REITs, and certainly the best in the triple net. The company pays a fixed fee at a rate of 5.1x, and EV debt is below 25%.
Capital markets “love” ADC – as evidenced by its track record of being able to provide liquidity for transactions in the form of unsecured debt and common equity. ADC uses very little preferred stock and uses almost no secured debt.
Its net debt/recurring EBITDA hadn’t been seen once since 2020, and the troubles started, at over 5.0x – clearly, the monthly dividend payout is very ample, with room to grow in the future.
The picture I want to show you in this article is that ADC is one of the best triple net lease REITs and they, like O, pay a monthly dividend. If you like recurring income, if you like security income, if you like stability, you should like ADC.
Will investing in ADC make you “rich”?
I would say No, that’s not what ADC is for.
While it may indeed be true that companies will give you 100%+ TSR (including dividends) over time, it may take a decade or more, and even 100% TSR is not The real wealth gap. It is not easy for an ADC to turn a $10,000 investment into a $100,000 investment.
What the company does is protect your capital, give you a good dividend – a dividend worth it – while also giving you the strong possibility of substantial capital appreciation.
As interest rates rise, costs increase for companies, and opportunity dwindles, this will obviously lead to FFO annual growth rates well below historical levels – and that’s where the main risk with these investments lies.
I’m here to show you.
Agreed with real estate – lots to like but slow or no growth.
Any REIT currently in this space is going to have some trouble growing. To be clear, when I say modest growth, ADC will still grow its FFO. It just does so at a rate of 1-4% instead of 5-8%. You’re going to see dividends continue to rise, which is what I believe, but there will be some “gaps” closing, and growth will need to be lower because underlying FFO growth won’t be able to keep up – eventually.
That doesn’t mean the company is a bad investment — it’s just more long-term and conservative.
While I often show you companies that may offer 100-300% RoR in 2-5 years, and I do invest 30-50% of my portfolio in such investments, the bulk of my portfolio is invested in continuing production out of company or mint cash.
This is how I secure my income – among other things.
Agree Realty is one of them.
First, it’s my firm stance that ADCs deserve a premium. If you disagree with this stance, you can probably see the downside here. The quality and safety of this REIT’s cash flow means I think 18-20x P/FFO is effective here as I think the company can pay its dividend rain or shine – in this case, income is one of my The main thing that is looking for.
If 20x P/FFO is valid, so is the 2025 upside.
Whenever someone tells me that I can invest $1,000 and earn 15%+ annual returns while being paid monthly in investment grade security while being based on some of the most recession resistant businesses in the country, my reaction is; “Take my money”.
It doesn’t need to be fancier than that.You can combine ADC and O into two income streams paid monthly without buying anything else, while I say you may be overexposed, I wouldn’t say that these two companies are at any risk of a fundamental downturn. Your income will be safe. I know a colleague who does exactly that – he has 29% of his capital in O and 20% in ADC, and he outperforms most of his peers in terms of RoR.
The ADC has crystal-clear projection clarity, almost clairvoyance. Analysts never miss negative news.Not based on 1 year or 2 years, not based on a 10-20% margin of error, and not based on the last time ten years. Not a single negative miss compared to this company is beyond the margin of error. No matter how the stock price moves, there is a very high level of conviction and clarity here.
It’s a “set it and forget it” stock.
Analysts other than us by S&P Global have a range of around $70 per share. So you see, 13 analysts have said ADC is trading below the lowest PT they give.
Their price peaked at $81/share and averaged $76/share. Twelve of 13 analysts have Buy or Outperform ratings (source: S&P Global), and these ratings largely reflect our iREIT stance on Alpha.
Agree that real estate is a “buy” for me. I’m hoping to “buy” more ADCs here, despite my already high exposure. It’s a company that’s too good to be a buy — so good you can’t help but include it in your portfolio as your own little monthly “money printing machine.”
Agree Realty is one of the highest quality investments in the entire REIT field after O. While there are plenty of opportunities that do offer higher, more realistic upside, few offer risk-free dividend yield with the potential for a reversal in such a safe situation. ADC is a monthly dividend company with a bright future – I’m constantly putting cash to work here.
ADCs make up a large portion of my conservative portfolio — both the private and corporate portfolios I run. It’s also one of my highest “ratings” when it comes to cheap.
Agree Realty’s PT is at least $75/share, which puts it up at least 10%, and possibly more.
Agree that real estate is a “buy”.
Remember, I only care about: 1. Buying undervalued companies at a discount — even if they’re slightly undervalued and not mind-numbingly large — allows them to normalize over time while reaping capital gains and dividends.
2. If the company is well outside normalized levels and goes overvalued, I take the gains and move positions to other undervalued stocks, repeating #1.
3. If the company does not enter overvalued status, but hovers in the range of fair value, or returns to undervalued status, I will buy more shares as time permits.
4. I reinvest dividends, job savings, or other cash inflow proceeds specified in Section 1.
Here are my criteria and how the company achieves them (italics).
The overall quality of this company is high.
This company is basically safe/conservative and well run.
The company pays a generous dividend.
The price of this company is very cheap at present.
The company has realistic upside based on earnings growth or multiple expansions/returns.
This company meets every one of my investment criteria (except being cheap) – I’m in “buy” status.