O - 3 'Rockefeller' REITs That Pay Monthly

2023-12-11 07:00:00 ET

Summary

• John D. Rockefeller was very astute at reading the markets.
• By most accounts, he was also ruthlessly devoted to expanding his business empire and fortune.
• He famously said, “Do you know the only thing that gives me pleasure?” with the answer being, “to see my dividends coming in".

Seven million people tuned in to see this year's annual "Christmas in Rockefeller Center" special.

That includes "three days of delayed viewing across NBC, Peacock, and digital platforms," Variety reports . This was a solid showing: TV's most-watched program that Wednesday (November 29) night and a 7% year-over-year jump.

Variety adds that:

This year's 'Christmas in Rockefeller Center' was hosted by Kelly Clarkson and featured performances by Chloe Bailey, Adam Blackstone, Cher, David Foster, Liz Gillies, Darlene Love, Seth MacFarlane, Barry Manilow, Katharine McPhee, Keke Palmer, Carly Pearce, and Manuel Turizo…"

It also, admittedly, did feature some angry protesters voicing their thoughts on Palestine. But that didn't present the same problem for those watching it from the comfort and safety of their own homes.

Here's the Rockefeller Center's featured photo on its official Christmas tree homepage:

Gorgeous, isn't it? And huge!

The site's history page adds how:

For more than eight decades, the Rockefeller Center Christmas Tree has stood as a holiday beacon for New Yorkers and visitors alike. While the lights, decorations, and stars have changed through the years, visiting the Tree remains a quintessential New York experience."

It started in 1931 when workers at Rockefeller Center collaborated to buy a 20-foot balsam fir to add some light to an otherwise dreary Great Depression year. Two years later, the Center decided to make it "an annual tradition and held the very first tree-lighting ceremony."

Today, it's just one ('HUGE') part of the Rockefeller legacy.

Your Daily Dose of History, Courtesy of John D. Rockefeller

The Rockefeller legacy is enormous, both in good ways and bad.

As big and popular as the Center's Christmas tree is, there's so much more to know about it, the institution behind it, and the man behind the institution.

Britannica writes :

Rockefeller Center, a 22-acre… multipurpose complex of 19 commercial and entertainment buildings located between 48th and 51st streets and between Fifth and Sixth avenues in the heart of Manhattan in New York City…

Originally built between 1929 and 1940, Rockefeller Center began as a 12-acre… complex of 14 art deco limestone buildings between Fifth and Sixth Avenues.

The complex was commissioned by John D. Rockefeller, Jr., of the famed Rockefeller family - principally to house… the Metropolitan Opera, a building move later canceled because of the financial straits of the Great Depression…"

As for that "famed" family, let's discuss its patriarch. Britannica writes about him :

"John D. Rockefeller (born July 8, 1839… died May 23, 1937…) [was an] American industrialist and philanthropist, [and] founder of the Standard Oil Company, which dominated the oil industry and was the first great U.S. business trust. He is the major historical figure behind the famed Rockefeller family and widely considered the richest American and biggest philanthropist in history."

The man was very astute at reading the markets. He was also a solid salesman (possibly because of his father's "snake oil" influence).

By most accounts, he was also ruthlessly devoted to expanding his business empire and fortune. When his Standard Oil monopoly was legally threatened, he simply "disbanded it" for a few years before bringing it right back together.

The trick worked from 1899 to 1911 when the U.S. Supreme Court declared Standard Oil illegal according to the Sherman Antitrust Act.

Yet Rockefeller managed to retain his immense wealth even after that.

A Happier, Healthier Path toward Achieving Wealth

I'm not saying Rockefeller's wealth made him happy.

I don't think it did.

Otherwise, he wouldn't have asked,

"Do you know the only thing that gives me pleasure?" with the answer being, "to see my dividends coming in."

Perhaps he was being ironic when he said that. (Hopefully.) And even if he wasn't, perhaps he changed his ways later on in life. (Hopefully.)

He definitely did do a whole lot of charitable giving, with Britannica explaining how:

He made possible the founding of the University of Chicago in 1892 and, by the time of his death… had given it some $35 million. In association with his son, John D. Rockefeller, Jr., he created major philanthropic institutions, including the Rockefeller Institute for Medical Research (renamed Rockefeller University ) in New York City (1901), the General Education Board (1902), and the Rockefeller Foundation (1913). Rockefeller's benefactions during his lifetime totaled more than $500 million."

And he still had money to spare. Moreover, his legacy today includes one of the world's richest families. On paper, they're far from the Rothschilds. But they also have a lot of money tied up in trusts and other accounts. So who ultimately knows their true net value.

What is known: that they started out rich and remain rich. Which probably has a lot to do with a respect for dividends.

I can't and won't promise you and your family that kind of wealth. I'm not even sure you'd want it considering some of the accusations levied against them.

What I can do is point you toward a few "Rockefeller style" investments with monthly dividends. If all goes well, they could add to your list of reasons to be joyful.

Oh, and you can buy them without being ruthless or risk running afoul of the law.

Realty Income ( O )

Realty Income is probably the best-known monthly dividend payer as it has declared 641 consecutive monthly dividends over its 54-year operating history and has raised the dividend 122 times since its public listing in 1994.

Realty Income is a net-lease real estate investment trust ("REIT") with a portfolio of approximately 13,250 commercial properties located in all 50 states, the U.K., Spain, Italy, and Ireland.

O's properties are leased to approximately 1,300 tenants that operate in 85 industries and roughly 39% of their annual rent comes from investment-grade tenants.

Realty Income primarily owns retail properties that are used in defensive industries such as grocery or convenience stores, but they derive approximately 13.1% of their annualized contractual rent from industrial properties and 2.6% from gaming properties.

Once the acquisition of Spirit Realty ( SRC ) closes, Realty Income's industrial properties as a percentage of their annual rent is expected to increase to approximately 15%.

As previously mentioned, Realty Income is very well known for its monthly dividend, and for good reason.

O is a S&P 500 Dividend Aristocrat that has increased its dividend for 29 consecutive years and has a compound annual dividend growth rate of 4.3% since its IPO in 1994.

They have been able to deliver such consistent dividend payments and growth due to the nature of their conservative business model which has achieved positive AFFO per share growth in 26 out of the last 27 years.

Realty Income's monthly dividends are supported by the cash flow from over 13,000 real estate properties and by its investment-grade balance sheet.

They have an A- credit rating and strong debt metrics with a net debt to pro forma adjusted EBITDAre of 5.2x, a long-term debt to capital ratio of 39.81%, and a fixed charge coverage ratio of 4.5x.

Their debt is 96% unsecured and 93% fixed rate with a weighted average term to maturity of 6.6 years and as of the end of the third quarter, Realty Income had approximately $4.5 billion of liquidity.

Over the past 10 years, Realty Income has delivered an average adjusted funds from operations ("AFFO") growth rate of 6.09% and an average dividend growth rate of 5.76%.

Analysts expect AFFO to increase by 2% in 2023, and then increase by 4% and 3% in the years 2024 and 2025 respectively.

Realty Income pays a 5.62% dividend yield that is well covered with an AFFO payout ratio of 75.69% and currently trades at a P/AFFO of 13.69x, compared to their 10-year average AFFO multiple of 18.86x.

We rate Realty Income a Buy.

Agree Realty ( ADC )

I like to look at Agree Realty as Realty Income's little brother. ADC is much smaller with a market cap of around $6 billion but both net-lease REITs have similar business models.

Like Realty Income, ADC is a net-lease REIT that targets commercial retail properties used in defensive industries that are resistant to ecommerce and recessions, but ADC is more of a pure play on retail properties without industrial or gaming exposure.

Another difference is that ADC has a ground-lease portfolio which makes up approximately 11.6% of their total portfolio's annualized base rent ("ABR") and they receive a larger portion of their ABR from investment-grade tenants at 68.9%, compared to Realty Income at approximately 39%.

Agree Realty's portfolio is comprised of 2,084 commercial properties that cover roughly 43.2 million SF of gross leasable area across 49 states.

At the end of the third quarter, ADC's portfolio was 99.7% leased and had a weighted average lease term ("WALT") of approximately 8.6 years.

ADC has an investment-grade balance sheet with a BBB credit rating and excellent debt metrics including a net debt to recurring EBITDA of 4.5x, a long-term debt to capital ratio of 30.42%, and a fixed charge coverage ratio of 5.1x.

ADC debt maturity schedule is set up well with no significant debt maturities until 2028 and a weighted average term to maturity of roughly 7 years. Plus, at the end of the third quarter Agree Realty had $957.4 million of total liquidity.

Originally ADC paid quarterly dividends and did so for 107 consecutive quarters from 1994 to 2020. In 2021 the company moved to a monthly dividend and since that time it has paid 35 consecutive monthly dividends.

Agree Realty has increased its dividend each year since 2013 and has an average dividend growth rate of 5.79% over the last 10 years.

Over the past decade, ADC has delivered an average AFFO growth rate of 5.52%. Analysts expect AFFO per share growth of 4% in 2023 and expect AFFO per share growth of 4% and 2% in the years 2024 and 2025 respectively.

Currently, ADC pays a 4.87% dividend yield that is well covered with an AFFO payout ratio of 73.24% and trades at a P/AFFO of 15.39x, compared to its 10-year average AFFO multiple of 17.76x.

We rate Agree Realty a Buy.

Note: Last week I visited Agree Realty's new HQ in Michigan and I met with the CEO, Joey Agree. It was great to tour the facility and to sit down with Joey to discuss the business.

I told members on Alpha that I felt encouraged by the meeting and decided to add more shares in ADC to my portfolio as a result of the interview. Boots on the ground is an important part of our research.

LTC Properties ( LTC )

LTC Properties is somewhat of a hybrid between an equity REIT and a mortgage REIT in that they own health care real estate and receive rental income from the properties they acquire through sale-leasebacks ("SLB") and receive interest income from the loan products they offer including mortgage loans, construction financing, preferred equity investments, and mezzanine lending.

LTC is a healthcare REIT that primarily invests in senior housing and skilled nursing properties. Their investment portfolio consists of 208 properties in 27 states that are managed by 29 operators.

When measured by gross real estate investments, approximately 46% of LTC's portfolio is made up of skilled nursing properties and approximately 53% of its portfolio consists of senior housing.

LTC generates most of its revenues from its owned portfolio, which totals 143 owned properties and makes up approximately 64.1% of its total revenues through rental income.

LTC's next largest revenue driver is interest income received from mortgage loans which made up approximately 25.7% of their total revenues for the trailing twelve months ended September 30, 2023.

Additionally, LTC generates interest income from financing receivables and notes receivables which contributed 7.1% and 2.2% of their total revenues respectively. Finally, LTC has interest in an assisted living property through a joint venture which made up less than 1% of its total revenues.

Although LTC does not have a credit rating assigned by Moody's or S&P Global, they are investment grade rated by the National Insurance Company rating agency.

LTC has sound debt metrics including a debt to gross asset value ratio of 42.1%, a debt to annualized adjusted EBITDAre of 6.0x, and a fixed charge coverage ratio of 3.4x.

At the end of the third quarter, LTC had $11.3 million of cash and equivalents and $37.8 million available to them under their credit revolver. Additionally, LTC has the ability to raise capital through the issuance of $128.8 million of stock through its Equity Distribution Agreements.

LTC has very manageable debt maturities in 2023 and 2024 with approximately 5.6% of their debt maturing through 2024, but they have several large debt maturities in 2025 which represents roughly 48.2% of their outstanding debt.

LTC has either maintained or increased its monthly dividend each year since 2008. They did not cut or suspend the dividend during the Great Financial Crisis or during the covid pandemic.

LTC's dividend has been very consistent, but it has not had the best growth rate, especially as of late.

LTC pays a monthly dividend of $0.19 per share ($2.28 annualized) and has maintained this rate since October 2016 when the monthly dividend was increased from $0.18 to $0.19 per share. On an annual basis, LTC has paid the same dividend rate of $2.28 per share for the last 7 years (including 2023).

Over the past decade, LTC has had an average annual AFFO growth rate of 1.92% and an average dividend growth rate of 2.49%.

Analysts expect AFFO per share to increase by 3% in 2023, and then increase by 1% and 3% in the years 2024 and 2025 respectively.

LTC pays a 6.88% dividend yield that is adequately covered with an AFFO payout ratio of 85.10% and currently trades at a P/AFFO of 12.04x, compared to their 10-year AFFO multiple of 15.40x.

We rate LTC Properties a Buy.

In Closing

There are other monthly-paying stocks that I own including Main Street Capital ( MAIN ), STAG Industrial ( STAG ), and Whitestone ( WSR ).

I don't own Gladstone Land ( LAND ), EPR Properties ( EPR ) and SL Green ( SLG ), however, they also pay monthly.

There are several ETFs that pay monthly and one that actually pays weekly, I covered it here: Sofi Weekly Dividend ETF ( WKLY ).

Regardless of the frequency of the dividend payment, the most important thing that we look for is the durability and safety of the dividend.

Over the last decade here on Seeking Alpha I've built a research business rooted in these disciplined investing practices.

It's only because of these attributes that I've been able to rebuild my wealth from the ground up.

As always, thank you for reading and commenting. Happy Holidays!

I do not think there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature." John D. Rockefeller

Note: Brad Thomas is a Wall Street writer, which means he's not always right with his predictions or recommendations. Since that also applies to his grammar, please excuse any typos you may find. Also, this article is free: Written and distributed only to assist in research while providing a forum for second-level thinking.

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3 'Rockefeller' REITs That Pay Monthly