Real estate investment trusts (REITs) are a good choice for investors who want to combine steady income with solid prospects for growth. While publicly held REITs are stocks with prices that can rise and fall like any other on their exchanges, the fact that they represent real estate assets and are required to pay out at least 90% of their taxable income make them especially attractive to certain investors.
If you're one of those income-oriented investors, you might consider REITs that go beyond quarterly payouts. These REITs do it monthly, instead of quarterly, adding potential diversity to fixed incomes and to a portfolio mix. Let's look at three in different fields of endeavor: ARMOUR Residential REIT (NYSE: ARR), Gladstone Land (NASDAQ: LAND), and LTC Properties (NYSE: LTC).
ARMOUR up for MBS investing with this REIT
ARMOUR Residential is a mortgage REIT. Rather than real estate itself, these trusts invest in mortgage-related assets, such as mortgages themselves and mortgage-backed securities (MBS). They make their money on the spread between what they can borrow and what they can buy. Not work for amateurs, but there's money to be made, if done well.
Mortgage REITs are more like bank and insurance stocks than other equity REITs. But REITs they are, and ARMOUR boasts on its website it's paid out $1.6 billion in dividends since its inception in 2009. The income for those dividends was generated through the company's investments in residential MBS through government-sponsored enterprises (GSEs) such as Fannie Mae (OTCMKTS: FNMA), Freddie Mac (OTCMKTS: FMCC), and Ginnie Mae (NASDAQ: GNMA), as well as other non-government-backed or sponsored securities.
ARMOUR REIT is run by ARMOUR Capital Management of Vero Beach, Florida, a Securities Exchange Commission (SEC)-registered investment advisor that currently manages more than $8.5 billion in assets. It most recently declared monthly dividends of $0.10 per share for October and November. That $1.20 annual payout represents a yield of 12.5% based on its Oct. 30 closing price of $9.60.
While that sounds high, it's been higher. ARMOUR's monthly dividend reached $0.33 a share for a few months in 2015 and 2016 and was at $0.17 in February before the pandemic. The company's current payout ratio is only 52.86%, and its stock is well off its 52-week high of $21.13, giving it a one-year total return right now that's down about 36%. A return to historical norms indicates the potential for growing income -- and maybe some share price boost, too.
Gladstone Land yields produce and produces yield
Gladstone's business model is to buy farmland and farm-related properties and then lease them on a triple net basis to tenants with a strong operating history and deep farming resources. The company says its farms are currently 100% occupied and all have abundant water resources.
Gladstone's stock closed on Oct. 30 at $7.31 and with a current dividend payout of $0.065 is yielding an annualized 10.86%. A forward payout ratio of 95.51% and a stock price still well off its 52-week high of $10.69 shows potential for steady income and more growth to come.
Gladstone is based in McLean, Virginia, and currently owns 127 farms in 13 states, covering about 95,000 acres and worth about $987 million. Annual row crops, such as berries and vegetables, along with permanent crops, including almonds, figs, apples, and vineyards, are included in its portfolio, along with related facilities.
Gladstone has paid out dividends to shareholders monthly since it went public in January 2013. It continues to acquire farms -- including three in South Carolina in October -- and is in a most essential business, where it's poised to grow crops that feed families and continue to yield profits for shareholders.
LTC Properties is an old reliable in senior living plays
Public for nearly 30 years, LTC Properties invests in senior housing and healthcare properties, primarily through sale-leaseback transactions, mortgage financing, preferred equity, and mezzanine lending. Based in Westlake Village, California, the company has 181 investments in 27 states with 29 operating partners. The portfolio is divided about equally between senior housing and skilled nursing properties.
Like many other operators of senior living facilities, LTC took a hit from the pandemic, reporting a drop in funds from operations (FFO) from $30.8 million in the third quarter of 2019 to $22.8 million in the same period this year. That said, funds available for operations were at $28.2 million, and LTC, which has been publicly traded since 1992, still completed or committed to nearly $20 million in two new senior living facilities.
Of primary interest to income investors, LTC on Oct. 1 declared a monthly dividend of $0.19 per share for October, November, and December. At a closing price of $33.01 on Oct. 30, that's a yield of 6.83%. LTC has traded at between $24.49 and $52.80 over the past 52 weeks, so this also looks like a stock that will pay a decent return with promise of growth upside, especially if you believe the battered senior living business will be on the mend when the pandemic abates. The Millionacres bottom line
These are three relatively small REITs that all have established histories of monthly dividend payouts, in diverse sectors with very different risk exposures. Together, they could make a nice package of income investments to take you into the new year.