Investors seeking regular dividend income have the opportunity to add monthly-pay stocks to their portfolios. Among the choices available, two attractive options are Realty Income (O) and Agree Realty (ADC).
While both companies follow the net-lease approach and focus on retail assets, they differ in their portfolio size, dividend growth streaks, and yield. Let’s explore these stocks and understand why they could be valuable additions to any investment portfolio.
Net-Lease Approach and Retail Asset Focus
Realty Income and Agree Realty utilize the net-lease approach, which involves owning single-tenant properties where tenants bear most operating costs.
Realty Income generates approximately 75% of its rents from retail assets and supplements its portfolio with industrial properties and unique assets such as vineyards and a casino. Agree Realty’s sole asset class is retail, providing stability and ease of buying and selling assets due to their similarity.
Strong Financial Standing and Bond Market Access
Both companies boast robust balance sheets and enjoy favorable access to the bond market. Realty Income holds an A- credit rating from S&P, while Agree Realty’s rating stands at BBB.
This financial strength allows them to utilize debt as a funding source for acquiring new properties, further enhancing their growth potential.
Dividend Growth Streaks and Portfolio Size
Realty Income has an impressive track record of increasing its monthly dividend for 29 consecutive years, demonstrating its commitment to rewarding shareholders. In contrast, Agree Realty’s streak is still commendable at 10 years, with its dividend growth temporarily halted in 2011 due to a tenant bankruptcy. Although Realty Income’s dividend growth record is stronger, Agree Realty has transformed into a different company and shows significant growth potential.
When it comes to portfolio size, Realty Income’s vast portfolio comprises over 12,400 properties, dwarfing Agree Realty’s portfolio of approximately 1,900 properties. While Realty Income’s size necessitates substantial investment for growth, Agree Realty, with its $6 billion market cap, can more easily expand its portfolio, potentially leading to faster dividend growth.
Dividend Yield and Suitability for Investors
Realty Income offers a higher dividend yield, currently standing at approximately 4.9%. Investors seeking maximum income would find Realty Income an attractive option, as its yield surpasses Agree Realty’s yield of around 4.3%.
The slight difference in yield can be attributed to investors willing to pay a premium for Agree Realty’s higher growth rate. Therefore, Agree Realty may be more suitable for dividend growth investors seeking potential capital appreciation alongside income.
Diversification and Well-Rounded Portfolio Approach
Both Realty Income and Agree Realty present solid investment options. While Agree Realty caters more to dividend growth investors, Realty Income appeals to those seeking higher yield. With their distinct characteristics and complementary strengths, combining both stocks in a portfolio offers a well-rounded approach to dividend investing.
By diversifying across these stocks, investors can benefit from the steady income streams provided by monthly-pay dividends while capturing potential growth opportunities.
