sFixed Income is a cheat code for retirement savings. Capital appreciation comes and goes (ask growth investors this year), but dividend payments are cold hard cash sent straight to your account. You can use it to reinvest in the source or use the cash in some other investment – even in growing stocks.
The key is to find a solid company with a history of paying dividends. three arrows, UMH . Characteristics (NYSE: UMH)And the Federal Real Estate Investment Fund (NYSE: FRT)And the real estate income (NYSE: O)It all fits the bill and can get cash flow into your account.
monthly distribution company
Mike Price (real estate income): Realty Income is a “Monthly Dividend Company”. officially. It’s a brand name.
You might think this is odd, but when a company has been increasing its dividend every year for 25 consecutive years (it’s also officially a Dividend Aristocrat) and is one of the most reliable monthly dividend payers, it’s fitting.
Unlike many real estate investment trusts (REITs), Realty Income has a strong balance sheet. It has an A3 credit rating and nearly $10 billion more in debt. Its average fixed debt ratio is 3.6% and management assumes that about 35% of its investments will be debt-financed in the future.
Finally, the motto of dividend payout is ingrained in the management of the company. Not only has the name been branded, but the management has also built dividend payments and dividend growth into a weighted average cost of capital account they use to judge investments and their success.
Management assumes the dividend yield will be 4.1% (now 4.06%) and that it will grow 4% annually. Over the past 28 years, the REIT has increased dividends by 115 times at a compound annual growth rate of 4.4%. This means that through many market cycles, stock market crashes, inflation, wars, and even a pandemic, Realty Income has kept going, buying more real estate and returning more and more money to shareholders.
UMH Properties delivers profits in all types of weather
Kristi Waterworth (UMH Characteristics): Buying a home has been tough for some time, but renting is getting tough too. And with housing shortages in every type of residential property, the situation isn’t going to get any better anytime soon. This is why I’m a huge fan of UMH’s features. Stock prices are down from the January opening of $26.55, but with a 3.95% dividend yield, this is definitely a company that doesn’t seem to notice a bear market.
In essence, UMH sells and rents mobile homes in approximately 130 mobile home communities in the eastern United States. The average rental occupancy is currently 95.3%, with an average rent of $839 per unit. Compared to the average US rent of $1,876, it’s not hard to see why these units have consistently maintained an occupancy rate above 92% since 2017. Since the start of the pandemic, UMH has continued to develop more vacant properties into additional mobile home lots. Usable, occupancy rates only increased. The company expects continued upswing and growth over the next five years through year-on-year rental increases in existing properties and strategic acquisitions of existing properties that have scope to add significant value with relatively small cash investments.
All this points to a long and happy life as a profitable stock whose management team strives for continuous improvement in all areas.
king of profits
Liz Bromer Smith (Federal Real Estate Fund): As the only REIT to hold the title of Dividend King, with 54 consecutive years of dividend growth, there is arguably no better REIT to start your passive income portfolio than the Federal Realty Trust.
This Net Leasing REIT, which owns 104 suburban outdoor retail malls and first-class urban markets across the country, has a proven track record of generating passive income. Over the past 20 years, the company has outperformed Standard & Poor’s 500, producing 11.55% annual return. Its earnings have grown by 120%.
It is also in a good financial position. The debt-to-earnings before tax, interest, amortization and amortization (EBITDA) ratio of the REIT is around 6, which is slightly higher than the average REIT of 5. In addition, it has sufficient liquidity of $1.3 billion in cash and cash equivalents which means it is financially prepared to weather the deflation in the economy.
Today’s price is down 26% from the recent highs, which is a great opportunity to get in. The company’s dividend yield is 4.17%, and given the ownership of the dividend, investors should expect dividend increases to continue well into the future.
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Christy Waterworth has positions at UMH Properties. Liz Bromer Smith has no position in any of the listed stocks. Mike Price has no position in any of the stocks mentioned. Motley Fool recommends UMH properties. Motley Fool has a disclosure policy.
The opinions and opinions expressed here are those of the author and do not necessarily reflect the views and opinions of Nasdaq, Inc.