I'm constantly on the hunt for solid dividend payers, but I really try to go off the beaten path to find stocks that don't make it onto various screens. I also try to hone in on dividends that exceed 5%, because inflation eats into wealth at a bit more than 3% annually over the long term.
Investors Real Estate Trust (IRET) is my latest find, buried in the earnings calendar by reporting on the last day of the quarter. Of course, I always raise an eyebrow at any company that dumps earnings on a Friday, but perhaps management likes flying under the radar. The company certainly has nothing to be ashamed of, with solid gains in FFO, net income, and a reduction in overall expenses. For those who aren't aware, the company owns 266 properties, over 9,000 apartment units, and over 12 million square feet of commercial buildings, primarily in the upper Midwest. Twenty-eight percent of its assets are multi-family, 32% commercial office, 26% commercial medical, and about 7% each in commercial industrial and retail. The company has been in business for over 40 years. It presently yields 6.5%.
One Liberty Properties (OLP) has been playing the real estate game for thirty years, and presently owns 99 properties across 29 states, providing it with substantial geographic diversification. It deals primarily in retail properties, owning the real estate it leases out to entities such as Applebee's (a subsidiary of DineEquity (DIN), Urban Outfitters (URBN), FedEx (FDX) distribution centers, LA Fitness, Big Lots (BIG) and Whole Foods Market (WFM). The combined market cap of all of these firms is into the billions, all generate sizable free cash flow, and thus, all make for excellent and reliable tenants. Indeed, the company's properties enjoy 97% occupancy, with an average leasing term of eight years. The investments in these properties are not in the billions, like so many other REITs, but under a half-billion, with a mere $200 million in mortgage debt. Rental income vastly exceeds interest expense, resulting in plenty of cash left over for shareholders, which translates to a 7% yield.
There are safer ways to invest in REITs, of course. If you want a vastly diversified option, you can always go with Vanguard REIT Index ETF (VNQ), but then you give up larger yields for the ETFs smaller 3.27% payment. However, a REIT that's been in business for 30 or 40 years is preferable to this investor. These companies know how to survive tough times, and if they are doing it with a 7.5% yield, I'm all for it.