This relatively unknown $7 billion name deserves a closer look from income-minded investors.
Are you shopping around for a new dividend payer? Perhaps you’ve heard some of the recent buzz suddenly surrounding a relatively small company called Agree Realty (ADC 1.05%).
Whatever the reason you’re reading this now, yes, Agree Realty is a smart choice for investors looking to meet one very specific criterion with their next stock pick.
What’s Agree Realty?
On the off chance you’re reading this and aren’t familiar with it, Agree Realty isn’t a typical stock of a typical company. It’s a real estate investment trust, or REIT, meaning it owns a bunch of rent-bearing real estate and passes along the bulk of its profits to shareholders.
Even by REIT standards, though, Agree Realty is somewhat of an outlier. While most real estate investment trusts hold properties like apartment complexes, office buildings, malls, or hotels, this REIT’s focus is on stand-alone stores and strip mall retailing.
This seems risky — at least on the surface. Headlines continue to document the industry’s ongoing struggle to compete with e-commerce’s continued growth. CoreSight Research reports more than 7,000 retail stores in the United States alone have been shuttered this year so far, marking the worst year since pandemic-riddled 2020. The industry’s bankruptcy protection filings are soaring, too, claiming names like Big Lots, Rue21, and Joann Fabric.
Dig deeper into the data, though. This isn’t quite the retail apocalypse it appears to be on the surface. Most of those vacant stores have since been reoccupied, with this year’s domestic store openings reaching a count of nearly 6,000. This seems to be more of a reshaping of the retail business than an implosion of it, with weaker players mostly just being replaced by stronger names.
This, of course, bodes well for a REIT like Agree Realty, which owns 47 million square feet worth of retail selling space spread across 2,271 various kinds of retail properties where consumers are increasingly shopping. That’s at strip malls and stand-alone stores located nearer their homes, as opposed to increasingly inconvenient malls.
There are three very specific additional reasons, however, that this REIT would be a brilliant addition to many investors’ portfolios.
Three reasons to buy Agree Realty stock
Those reasons? Chief among them is the top reason investors own any real estate investment trust — its dividend. Newcomers will be plugging into this name while its forward-looking dividend yield stands at 4.3%. For comparison, the S&P 500‘s current trailing yield is markedly lower at only 1.3%.
This strong yield isn’t the mere result of a mathematical fluke, either. Agree Realty has not only been able to pay out its monthly (yes, monthly) dividend like clockwork for years now but has reliably paid — and grown — its dividends since shortly after its 1994 initial public offering. Indeed, combining this REIT’s price appreciation with its dividend’s continued growth, shareholders’ net average annual return since this company’s IPO is a market-beating 12.3%.
ADC Net Income (Quarterly) data by YCharts
And this pace of dividend growth and net long-term gains isn’t likely to slow down anytime soon, if ever.
That’s a claim many investors might question, given the amount of disruption the retail industry appears to be experiencing. Agree Realty is sidestepping the brunt of this turbulence, however, mostly because it’s the retailing sector’s strongest name. This REIT’s top tenants include Walmart, Tractor Supply, Dollar General, Best Buy, TJX, Dollar Tree, Lowe’s, and Kroger, just to name a few. These few companies alone collectively account for about one-third of this REIT’s annual rent revenue. The other two-thirds of its renters, however, are similarly resilient. Underscoring this resiliency is the fact that, as of September, 99.6% of its properties were occupied by paying renters.
Finally, interested investors may want to go ahead and take the plunge sooner rather than later because this REIT’s price is probably discounted as much as it’s going to be here.
For the record, shares have stumbled more than the 10% pullback they’ve suffered since October. Those setbacks haven’t been the norm, though. They were the result of incredibly unusual circumstances like the onset of a pandemic or 2007/2008’s real estate debacle, for instance. The interest rate volatility of last year was also temporarily disruptive. Outside of oddities, this ticker’s corrections are rarely very big or long-lived.
This might help: Although Agree shares have lost ground over the course of the past couple of months, the analyst community isn’t deterred. Most of this crowd still rates this REIT as a strong buy, while their consensus price target of $80.47 stands 14% above Agree Realty’s present price. For a REIT that’s also paying a generous dividend in the meantime, that’s quite a bit of upside.
Ideal for one particular investment goal
Is it right for everyone? No. If your one and only goal is growth and you’re looking to take aggressive risks in an effort to maximize your potential gains, Agree Realty isn’t for you. Even factoring in its ever-growing dividends, it’s a fairly slow mover.
If you’re an income-minded investor on the hunt for a new dividend payer with an above-average yield you can rely on, however, this is a top prospect worth considering.
