Being a landlord is one of the oldest ways to earn an income. And nowadays you don’t have to buy a house to participate.
Check out real estate investment trusts, which are publicly traded companies that own income-producing real estate.
REITs collect rent from their properties and pass it on to shareholders in the form of dividends. That means investors don’t have to worry about screening tenants, assessing damage, or chasing down payment arrears. Instead, they just sit back and enjoy the dividend checks that come in when they pick a winning REIT.
Of course, the COVID-19 pandemic has affected some commercial real estate. And not all REITs are the same. For example, if you’re a landlord for e-commerce giant Amazon, you shouldn’t have a problem collecting a steady stream of rental income.
With that in mind, let’s take a look at two REITs that pay outrageous dividends to investors – one of them could be worth getting started with some of your extra money.
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The first is STAG Industrial (STAG), a REIT that owns and operates single-tenant industrial real estate throughout the US. The largest tenant is Amazon.
The company’s portfolio consists of 563 properties totaling approximately 112 million rentable square feet in 41 states.
Note that about 460 of those properties are warehouses, which happen to be an essential part of e-commerce.
In addition, a 2020 tenant survey found that approximately 40% of the REIT portfolio consists of e-commerce activities.
Check out the dividend history to see how solid STAG Industrial is.
Since the company went public in 2011, it has been paying a higher dividend every year.
While most dividend-paying companies follow a quarterly distribution schedule, STAG Industrial pays shareholders every month. The monthly dividend rate is 12.7 cents per share, which translates to an annual return of 4.3%.
STAG Industrial shares are down 25% over the past 12 months.
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When it comes to paying monthly dividends, one company stands out above all: Realty Income (O).
Realty Income has been paying uninterrupted monthly dividends since its inception in 1969. That’s 629 consecutive monthly dividends.
Better yet, since the company went public in 1994, it has announced 117 dividend increases.
Realty Income has a diverse portfolio of more than 11,700 commercial properties in all 50 states, Puerto Rico, the UK and Spain. It leases them to approximately 1,040 different tenants operating in 60 industries.
This means that even if one tenant or sector falls into a recession, the impact on the company-level financial situation is likely to be limited.
For example, while Realty Income leases some properties to AMC Theaters — whose business was impacted by COVID-19 — it also has Walgreens, FedEx, and Walmart among its top tenants. And these companies proved largely pandemic-proof.
Last month, the REIT announced a monthly cash dividend of up to 24.8 cents per share, giving the stock an annual dividend yield of 4.6%.
Realty Income stocks are down just 5% over the past year.
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This article provides information only and should not be taken as advice. It comes without any kind of warranty.