DiversifiedPortfolio – Fountainheadinvesting

Playing defense. I’m going to add dividend / income generating defensive stocks/ REITs to diversify from semis and tech.

REITs are structured to invest in property and distribute income as dividends to shareholders. They often work well as defensive, less volatile income generating vehicles and its worth owning some.

Realty Income Corporation (NYSE:O)

Long dividend growth track record, maintains a top-tier balance sheet.
High exposure to investment grade tenants.
Lower leverage profile than peers, with small and manageable near-term debt maturities.
Less bottom-line drag from refinancing maturing debt at higher interest rates.
Realty Income appears to benefit from its A- credit rating.
0.8% same store rental revenue growth, a solid number for the industry.

Risks

Tenant Red Lobster filed for bankruptcy but is only 1% of volume.

The REIT is down 7% for the past year but has recovered from its low of $45.

The main fear with REITs/Dividend stocks – while dividend growth and dividend yields are attractive, its essential that the stocks at least remain flat otherwise pocketing the dividend and losing it in the share price is meaningless! We must be careful to not overpay.

gree Realty Corporation (ADC) – Buy $61 REIT (Real Estate Investment Trust) Dividend Yield 4.6%.

Consistently higher than 99% occupancy, diverse set of retail clients.
Investment grade tenants, Agree’s debt rating is BBB Investment grade
Well diversified tenants – groceries, auto, restaurants, big box and convenience stores
Borrows at a spread of 1% above treasury, interest rate cuts are going to help debt renewals in 2025 and beyond.
Forward growth estimates of 5-10% for total revenues

Agree is valued at 15 times Adjusted FFO (Funds from operations) – higher than the market average of 12-13. FFO is a better measure than Earnings for realty companies. Agree’s FFO growth is estimated higher as well, as is the payout to shareholders so the yield will actually get better.

In Agree’s case the stock has actually remained flat over 1 year in spite of higher interest rates and all the action being focused on tech. In the past 5 years it returned 3% but in the last 10 over 124%, so with the dividends this has been quite a good performer. The other risk is that 50% of its business is concentrated in 10 states, but the states are diverse from the sunbelt to the Northeast.