Real estate investment trusts (REITs) hold a natural attraction for income investors: REITs are required to pay out most of their taxable income directly to shareholders. Most of them do that on a quarterly basis, but some pay monthly, which many income investors may find even more attractive, perhaps especially those of us who are at the Social Security stage of life. (OK boomer, right?)
But not all REITs are created equal. While most do make the money they need to pay their dividends, at least most of the time, this isn't guaranteed principal like a savings account at your bank or credit union. But they do pay a lot more interest.
So to help real estate investors seeking some conservative picks that should reliably provide monthly income for years to come, we chose three to consider, each from a different industry, so as to provide some diversification, too.
They are mortgage REIT AGNC Investment Corp. (NASDAQ: AGNC), healthcare REIT LTC Properties (NYSE: LTC) and office REIT SL Green Realty (NYSE: SLG). Here's a quick look at each.
AGNC Investment Corp.
Bethesda, Maryland-based AGNC Investment Corp. invests primarily in agency mortgage-backed securities, thus its name. Those agencies are the Government National Mortgage Association, or Ginnie Mae; the Federal National Mortgage Association, or Fannie Mae (OTCMKTS: FNMA); and the Federal Home Loan Mortgage Corporation, or Freddie Mac (OTCMKTS: FMCC), the latter two also known as the government-sponsored enterprises (GSEs).
AGNC makes most of its money by leveraging collateralized borrowings structured as repurchase agreements, and it's been doing so since 2008. The collateralized mortgage obligations are guaranteed by the U.S. government, but there is interest rate risk. Watch carefully when interest rates rise.
AGNC stock was yielding 8.02% based on a midday price of $17.89 per share on April 29, just a shade below its 52-week high of $18.00 per share reached the day before. Its $0.12 per share monthly dividend paid out on April 29 was the 13th straight at that level. The monthly payout has actually dipped steadily since they began in the third quarter of 2014, but that yield is still healthy.
Westlake Village, California-based LTC Properties specializes in lending and leasing to long-term healthcare providers, a diverse and growing industry as America ages. Its portfolio of 181 properties is evenly split between senior housing and skilled nursing facilities operated by 29 partners in 27 states.
LTC's investment in those facilities takes multiple forms, including mortgage and construction financing, joint ventures, sale-leasebacks, mezzanine and preferred equity lending, and more.
LTC stock was yielding 5.36% based on a midday price of $43.01 per share on April 29, close to its 52-week high of $44.73 on March 15. This REIT has been paying monthly dividends beginning with $0.155 a share in August 2013 and $0.19 a share since October 2016.
SL Green Realty
SL Green Realty has the distinction of being the big kahuna in the Big Apple: It's New York City's largest owner of office real estate. In fact, it's now headquartered at One Vanderbilt Avenue, the new 67-floor skyscraper in midtown Manhattan.
SL Green is a self-managed REIT, with in-house capabilities in property management, acquisitions, financing, development, construction, and leasing.
SL Green Realty buys and manages Manhattan commercial properties and at the end of March claimed interest in 84 buildings totaling 37.8 million square feet. During the pandemic, SL Green took a hit like pretty much every office space investor but has held up relatively well for the sector, as Millionacres' Matthew DiLallo shares here: "Is SL Green Realty a Buy?"
SL Green stock was yielding 4.89% based on a midday price of $75.10 per share on April 29, about 4% off its 52-week high of $77.99 on March 15. This REIT began paying monthly dividends with a $0.33 payout in June 2013 and has been paying $0.303 per share per month so far in 2021. That's down from about $0.70 to more than $0.80 per share for the past few years before the pandemic arrived. But if you're confident in office space, New York, or both, this is a good equity to consider.
The Millionacres bottom line
AGNC, LTC, and SL Green are in three different industries but, along with being structured as REITs, they offer some similarities. Each pays a monthly dividend and appears to have the business prowess to provide reliable income to those more interested in that than stock price appreciation. These are not go-go stocks, but they can help stuff the stockings, or mattress, or savings account where you stash your cash.