January 18, 2022

3 REITs to Supplement Your Social Security Income

Inflation has reared its ugly head and the federal government has responded with a 5.9% cost of living (COLA) increase, the largest in about four decades. That’s good news for the roughly 47 million retired Americans who depend on that monthly payment.

How you supplement that fixed income, however, is an individual choice. It can take a while for interest rates to have much of an impact on the minimum returns from fixed-rate sources such as CDs, savings accounts from banks and credit unions, and even bonds.

Investors looking to increase returns while reducing risk in the stock market should consider real estate investment trusts (REITs). These companies are required by law to pass on at least 90% of their taxable income to investors — income they generate as owners and/or operators of a wide variety of real estate properties.

Here are three REITs to consider that not only have years of solid returns, but have also increased their dividends every year for at least nine years, helping their investors keep up with rising prices over that period. As a bonus, each of these REITs belongs to the small group of REITs that pay monthly (instead of quarterly), increasing their attractiveness as a supplement to monthly Social Security Payments.

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Agree Real estate

Agree Real estate (NYSE:ADC) has a portfolio of approximately 1,400 properties in 47 states that it leases to what it calls leading, omnichannel retail tenants. This suburban Detroit REIT has a compound annual dividend growth rate of 5.5% over the past 10 years.

Agree is expanding both its portfolio and its payouts. The company invested approximately $343 million in 83 net leased retail properties in the third quarter. That will add more cash flow to a portfolio that is now 99.6% let, with an average term of 9.5 years. In addition, 66.9% of Agree’s rent comes from investment-grade tenants.

Agree Realty traded at about $69 a share and returned about 3.95%. The monthly dividend for the January 14 payout was $0.227 per share, up 9.8% from the same month a year ago. So a $10,000 investment in Agree Realty stock would buy you about 145 shares and pay you about $32.90 a month.

real estate income

real estate income (NYSE:O) has a portfolio of more than 11,000 properties occupied by 650 different clients in all 50 states, the United Kingdom and Spain. This San Diego-based REIT is one of the most popular real estate investments in the market, in no small part because of 97 consecutive quarters of dividend increases on top of a record 50-plus year of no missed monthly payouts. That dividend has increased by almost 25% over the past five years

Realty Income traded at about $70 a share, yielding about 4.13%. The monthly dividend for the January 14 payout was $0.2465 per share. So a $10,000 investment in Realty Income stock would buy you about 143 shares and pay you about $35.20 a month.

The company is taking steps to maintain momentum by investing a record $3.78 billion in its properties in 2021 (including the first in continental Europe), acquiring rival VEREIT and divesting its office properties in a new publicly traded company named Orion Office REIT. The company also forecasts a 9.2% jump in 2022 in adjusted funds from operations (FFO), a critical measure of a REIT’s cash flow.

STAG Industrial

STAG Industrial (NYSE:STAG) has a portfolio of 517 single-tenant industrial buildings spread across 40 states. This Boston-based REIT was founded in 2010 and went public in 2011. Since then, the company has posted dividend increases for nine straight years.

Signs point to more to come. The company purchased 24 buildings in 3Q21, adding 4 million square feet to its portfolio, and was able to increase rents 14.7% on 3.7 million square feet of new and renewed leases in the quarter. In addition, 97% of the available space in the entire portfolio has been leased, providing a flow of health revenue from a portfolio that has reached 103 million square feet.

STAG Industrial traded at about $44 a share, yielding about 3.24%. The monthly dividend for the January 18 payout was $0.121 per share. So a $10,000 investment in STAG Industrial stock would buy you about 227 shares and pay you about $27.50 a month.

Nothing is certain, but these are good choices to consider

REITs can be a nice addition to the income from all those years in taxes the typical retiree has paid to Social Security, plus a likely increase in the stock price. Any of these three choices could be an appropriate place to put that strategy into play to reduce income insecurity during your retirement years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium consulting service from Motley Fool. We are fur! Questioning an investment thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.


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