Three Potent Motivations to Purchase Agree Realty Shares without Delayed Consideration
Three Potent Motivations to Purchase Agree Realty Shares without Delayed Consideration
Are you searching for a new dividend provider that ticks a specific box for your investment strategy? You might have stumbled upon the buzz around a relatively little company called Agree Realty (ADC -0.72%).
Regardless of the reason you're here, yes, Agree Realty is worth keeping an eye on for investors seeking to meet a specific requirement for their next stock acquisition.
What is Agree Realty?
In case you're unfamiliar with the name, Agree Realty doesn't fit the mold of a typical stock issued by a typical company. It's a real estate investment trust, or REIT, which means it owns a substantial collection of income-generating real estate properties and distributes most of its profits to shareholders.
Even within the realm of REITs, Agree Realty stands out a bit. While most real estate investment trusts focus on properties like apartment complexes, office buildings, shopping malls, or hotels, this REIT specializes in standalone stores and strip mall retailing.
This might appear risky, given the ongoing challenges facing the retail industry as e-commerce continues to gain ground. CoreSight Research highlights more than 7,000 stores in the United States alone that have been forced to close this year, making 2022 the worst year since the pandemic-impacted 2020. The number of retail bankruptcies is also on the rise, with casualties such as Big Lots, Rue21, and Joann Fabric.
However, scratching beneath the surface reveals a slightly different picture. Most of those vacant stores have been reoccupied, with domestic stores opening at a rate of almost 6,000 this year. This suggests a transformation rather than the demise of the retail sector, with weaker players being replaced by stronger competitors.
This situation is beneficial for a REIT like Agree Realty, which owns 47 million square feet of retail space, spread across 2,271 retail properties. These properties are located in shopping centers and standalone stores that are convenient for consumers, rather than the increasingly inconvenient malls.
There are three compelling reasons, however, why this REIT would make an excellent addition to many investment portfolios.
Three reasons to add Agree Realty to your portfolio
So, what are these reasons? The most compelling one is the primary reason investors purchase shares in any REIT - its dividend. Newcomers to the stock can expect a forward-looking dividend yield of 4.3%. For comparison, the S&P 500's current trailing yield is a much lower 1.3%.
This high yield isn't solely due to mathematical chance. Agree Realty has consistently paid its monthly (yes, monthly) dividend for years, and has not only maintained but increased its dividends since shortly after its 1994 initial public offering. Shareholders' net average annual return since the IPO is a impressive 12.3%.
And this rate of dividend growth and long-term gains is unlikely to slow down anytime soon, if ever.
That assertion might raise eyebrows from skeptical investors, given the turmoil in the retail sector. Agree Realty has managed to avoid the majority of this turbulence, though, primarily because it's one of the sector's strongest players. Its top tenants include names like Walmart, Tractor Supply, Dollar General, Best Buy, TJX, Dollar Tree, Lowe's, and Kroger. These tenants collectively contribute about one-third of this REIT's annual rental revenue. The remaining two-thirds of its renters also exhibit resilience, with 99.6% of its properties occupied by paying tenants as of September.
Lastly, if you're considering investing, it may be wise to jump in sooner rather than later.
For the record, Agree Realty shares have experienced a 10% drop since October, which is unusual, but not unheard of. These setbacks, however, are typically short-lived. They have usually been the result of extraordinary circumstances such as the onset of a pandemic or a major real estate crisis, like the one in 2007/08. Last year's interest rate volatility was also a temporary setback.
This might be helpful: Although Agree Realty shares have lost value in recent months, the analyst community remains optimistic. Most of this group still rates this REIT as a strong buy, while their consensus price target of $80.47 is 14% higher than Agree Realty's current price. With a generous dividend being paid in the meantime, this represents a substantial upside potential.
Suitable for a specific investment strategy
Is it suitable for everyone? No. If growth is your primary goal and you're prepared to take aggressive risks in pursuit of maximum gains, Agree Realty is not for you. Even factoring in its dividend growth, it's a relatively slow-moving investment.
However, if you're an income-oriented investor in search of a reliable dividend payer with a higher-than-average yield, Agree Realty is absolutely worth considering.
Agree Realty's strong financial performance, as evidenced by its consistent dividend payments and dividend growth since its initial public offering, makes it an attractive option for investors interested in finance and investing, particularly those focused on income-generating investments. The REIT's high dividend yield of 4.3%, significantly higher than the S&P 500's current yield, further highlights its financial health and potential for generating income.