Some dividends are more durable than others. That’s due to a combination of the underlying company’s financial strength and the resiliency of its business model. Companies with those characteristics make excellent ones to buy and hold for a lifetime of stable and growing dividend income.
Many real estate investment trusts (REITs) have those durable traits, including Agree Realty (NYSE: ADC), Stag Industrial (NYSE: STAG), and Sun Communities (NYSE: SUI). That makes them ideal for those seeking enduring income that should stand the test of time.
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Agree Realty has been the model of consistency over the years. The retail REIT has grown its dividend at a solid 5.7% annual rate during the past 10 years. Its dividend currently yields over 4%, putting it several times higher than the S&P 500‘s (SNPINDEX: ^GSPC) 1.2% yield.
The company has built a very strong foundation. It focuses on owning freestanding properties leased to high-quality retailers (67.5% have investment-grade credit) in resilient sectors (e.g., grocery, home improvement, tire and auto service, and convenience stores). It utilizes long-term net leases or ground leases that provide predictable rental income because tenants cover all operating costs (including routine maintenance, building insurance, and real estate taxes).
Agree Realty also has a very strong financial foundation. It has an excellent investment-grade credit rating backed by a low leverage ratio. That gives it the financial flexibility to continue acquiring income-generating retail properties. It also has a very conservative dividend payout ratio for a REIT, at 73% of its adjusted funds from operations (FFO).
The company has a long growth runway ahead. It works directly with many high-quality retailers that still own over 168,000 locations. That should provide the REIT with a steady stream of sale-leaseback transactions in the coming years.
Stag Industrial has also been very consistent over the years. The…
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