3 high-yielding dividend stocks you won’t want to overlook
Many companies pay dividends. Because of this, it can be easy to overlook some big ones.
With that in mind, three dividend-focused investors have found attractive dividend-paying stocks they think most investors overlook. Here’s why they don’t want you to miss out on the big wins offered by Gladstone Commercial (GOOD -2.28%), Simon Real Estate Group (GPS -3.13%)and Getty Real Estate (GTY -0.59%).
Gladstone Commercial doubles its investment in industrial real estate for the benefit of its shareholders
Mark Report (Gladstone Commercial): Gladstone Commercial is an office and industrial real estate investment trust (REIT) with a track record of performance that perfectly matches the S&P500 in total return since the REIT went public in 2003. A $10,000 investment would then be worth $60,000 now.
This record includes 211 consecutive monthly dividend payments. David Gladstone, the founding CEO, views his offering as an income stock, suitable for people who like a steady, predictable stream of income each month. Retirees, for example, are a great place, Gladstone says, and his company’s assets are all managed with that reliable income in mind.
This income comes from a current portfolio of 136 properties in 27 states with a client list of 112 tenants in 19 industries. The properties are single-anchor, multi-tenant net leased assets “with an emphasis on industrial products.”
This emphasis was highlighted in the REIT’s second quarter 2022 earnings report, where it noted that its portfolio had reduced its office allocation to 44% while increasing its industrial commitment to 52% with plans for the increase to 60% over the next 18 months.
The CEO also says he has serious reservations about the future of office real estate, pointing in particular to the large number of people working from home with no intention of returning. In fact, the 15 potential acquisitions that Gladstone Commercial is currently considering are all industrial because, as CEO Gladstone said on the recent conference call, “there aren’t a lot of manufacturing jobs you can do since your house”.
Industrial, of course, means both logistics and manufacturing properties, and Gladstone expressed renewed optimism about the latter, due to offshoring moves by many manufacturers interested in setting up or returning operations to the States. -United.
The company’s dividend currently pays around 7.3% and has generally been around that level or slightly higher for over a decade.
Yield, of course, is a function of both stock price and dividend payouts, and there’s not much a company can do about the former. It depends on the market.
But the company determines its payout, and Gladstone Commercial executives have a long track record of strong performance in this regard, as well as an investment strategy that should continue for years to come. This strategy has also supported a reasonably stable share price over the years.
I own Gladstone Commercial and intend to continue to increase my ownership.
Simon Property Group will benefit from higher wages and lower petrol prices
Brent Nyitray (Simon Real Estate Group): Simon Property Group is an operator of high quality shopping centres, high end retail outlets, lifestyle properties and other assets including The Mills shopping mall REIT. It also has an 80% stake in Taubman Centers, another commercial REIT.
The stock has been hammered this year by rising rates and recession fears as well as fears that e-commerce will increase its share, which will be bad news for brick-and-mortar retailers. The stock is down 33% since the start of the year, well below the S&P500.
The blow to Simon Property has always been the view that e-commerce will continue to take share and mall traffic will decline. It’s a valid fear, but the company’s Q2 2022 numbers certainly didn’t show things getting worse. The occupancy rate increased by 2.1 percentage points year over year to reach 93.9%. Retailer sales at malls and outlets rose 26% year-over-year to a record $746 per square foot.
During the second-quarter earnings call, CEO David Simon called the company’s stock “ridiculously cheap” as the company raised its guidance for full-year operating funds and increased its dividend. At current levels, the stock has a dividend yield of 7.4%, which is pretty high, except for the start of the COVID pandemic period, when mall REITs sold off due to pandemic-related closures.
The United States may (or may not) be in a recession, but consumers should benefit from lower gas prices. Plus, workers are getting raises – the average hourly wage rose 5.2% in July. Although there is some gloom about the economy as a whole, so far the labor market is extremely tight and workers will benefit from lower commodity prices.
The fuel to keep on climbing
Matt DiLallo (Getty Realty): Getty Realty has quietly built up a strong dividend history. The REIT has increased its payout at a compound annual rate of 5.4% since 2015. It is currently yielding 5.5%, well above the industry average of around 3.5%.
Getty should be able to continue to grow its high-yield dividend in the years to come. The REIT operates a sustainable real estate portfolio focused on properties where consumers spend money in and for their cars, such as convenience stores with gas stations, car washes, auto parts stores and automotive service centers. It leases these properties to operating companies under long-term contracts net leases where the tenant is responsible for maintenance, building insurance and property taxes. This lease structure allows him to collect regular rental income to support his high-yield payment.
The REIT also has a strong investment-grade balance sheet and a conservative dividend payout ratio (76% in 2021). This gives him the financial flexibility to continue to grow his portfolio, which he does primarily by doing sale-leaseback transactions. The REIT invested $50.5 million in 17 properties in the second quarter, including the acquisition of 11 car washes and one convenience store and financing the construction of two new convenience stores and three car washes. Meanwhile, it has pledged to invest an additional $125 million in the development and acquisition of 30 convenience stores and car washes over the next year. It is also redeveloping five properties and has several more in various stages of planning. These investments will help increase its rental income, which should allow Getty Realty to continue to grow its high-yield dividend.
Getty Realty isn’t flashy, which makes it easy to miss. However, it has steadily increased its high-yield dividend over the years, which is likely to continue in the future. This makes it a title that passive income seekers won’t want to overlook.