4 REITs With A 6.3% Yield Average I Am Investigating For My Dividend Portfolio

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Includes: APLE, BPY, KIM, STAG
by: Steven Fiorillo
Summary

$10,000 invested across APLE, BPY, KIM and STAG allows you to generate 6.3% in annual dividends which equals $629.04 in annual income.

The combination of these four REITs generates monthly dividends which can be beneficial to any portfolio.

These four companies focus on physical real estate assets and provides a diverse combination across the sector.

Many people I know have either made money or are currently making money from investing in physical real estate. Some have bought houses or apartments and either rented them or sold them while others have bought commercial properties and rented the space out. While many including myself may be tempted to embark in the real estate game it may just not be the right move. Unfortunately, I am not handy in the slightest bit and to be perfectly honest if I tried to fix something the smart money is that I would just make it worse. This is the main reason I have never pulled the trigger on purchasing a physical real estate asset to rent out because I would probably spend way too much of the profit on fixing items and maintaining the property.

Luckily for me Real Estate Investment Trusts or REITs exist. These investments allow me to invest in real estate plays and collect a dividend without having to worry about the headaches of actually owning physical real estate. If you have read any of my dividend portfolio articles I currently have 49.19% of my dividend portfolio allocated to stocks and 50.81% allocated to ETF's. Within the stock side of my dividend portfolio 15.73% is geared toward mortgage REITs while 13.04% is dedicated to equity REITs. I have identified four REITs consisting of Apple Hospitality (APLE), Brookfield Property Partners L.P (BPY), Kimco Realty Corp. (KIM) and Stag Industrial Inc. (STAG) which I am looking at adding to my portfolio in the future. These four REITs will help round out any dividend portfolio by diversifying their exposure across different physical assets.

Generating monthly dividends is an income seekers dream

For this article I am using a $10,000 budget distributed evenly for my examples below. Allocating around $2,500 per position allows you to generate 6.3% in annual dividends prior to compounding which equals $629.04 in annual income. These four positions allow an investor to generate monthly income with the majority being paid in the first and third months of each quarter. Monthly dividends are a dividend investors dream because this can be converted to monthly income during retirement. I am looking to increase my exposure to physical real estate in my personal dividend portfolio while increasing my monthly & annual dividend income. I am not sure the sequence I will add these positions to my portfolio but I plan on doing an article on each company as I add them.

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(Source: TD Ameritrade)

Ticker Price Shares Investment % Of Portfolio Dividend Per Share Total Dividend Dividend Yield
STAG $30.61 80.00 $2,448.80 24.52% $1.43 $114.40 4.67%
KIM $18.45 137.00 $2,527.65 25.31% $1.12 $153.44 6.07%
BPY $19.33 130.00 $2,512.90 25.16% $1.32 $171.60 6.83%
APLE $15.81 158.00 $2,497.98 25.01% $1.20 $189.60 7.59%
$9,987.33 $629.04 6.30%

(Source: Steven Fiorillo) (Data Source: Seeking Alpha)

Apple Hospitality will provide exposure to the hotel industry

APLE currently operates 234 hotels across 34 states in 87 markets. Within their portfolio they have 30,046 guest rooms with an average property age of four years. There are many things I like about APLE and I am going to start with their ownership. APLE is one of the largest owners for both Hilton and Marriott properties. Their brand ownership is concentrated across Hilton, Marriott and Hyatt with rooms in well-known facilities such as Hilton Garden Inn, Hampton by Hilton, Embassy Suites, Courtyard and Residence Inn's.

APLE's management team consists of seasoned veterans with substantial skin in the game. The average executive tenure is 18 years and this team has established and operated 8 public REITs while having purchased 433 hotels. There is representation from APLE's management on over 10 Marriot & Hilton advisory boards. One of the most enticing aspects of the management team is APLE's corporate governance as 80% of executive target compensation is incentive based. In addition there is a required share ownership by corporate leaders as the CEO is required to own shares equal to 5 times base salary, executive officers are required to own shares equal to 3 times base salary and directors are required to own shares equal to 2 times base cash compensation. This makes me sleep well at night knowing that management has skin in the game and the corporate governance truly aligns with shareholders.

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(Source: Apple Hospitality Investor Presentation)

APLE's dividend is very appealing to me as it is easily covered by a payout ratio just under 70% with a forward yield of over 7.5%. APLE pays their dividend on a monthly basis which I prefer because in the long run it allows me to compound at a quicker rate. Since the dividend started APLE has not missed a monthly payment. I am a fan of Apple Hospitality since I believe there will always be a need for affordable quality hotels especially with a growing population. The consistent monthly dividend, strong properties and a management team with skin in the game are good enough reasons for them to be added to my portfolio.

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(Source: Seeking Alpha)

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(Source: Seeking Alpha)

Kimco Realty (KIM) adds diversification by leasing property to some of the largest companies in the U.S

The next REIT I am evaluating is Kimco Reality as I am a firm believer that brick and mortar retail isn't dead. As of March 31st, 2019 KIM owned interests in 430 U.S shopping centers with 75 million square feet of leasable space. Their properties are concentrated in major metropolitan markets. Kimco has a strong portfolio with 7,900 leases from 3,700 tenants. KIM's average lease for large ancho locations is 10 years and for small shops is 5 years. Throughout their portfolio rental rates for new leases are up 17.4% as rental rates for new leases increased over 10% for the 21st straight quarter.

I really like the fact that 22.3% of Kimco's leases are filled by some of the largest companies in the U.S which include TJX, The Home Depot, Ahold Delhaize, Albertsons, PETSMART, Ross, Whole Foods, Walmart, Bed Bath and Beyond, Kohl's, Burlington, Michales, Target and Petco. KIM's new leases are also reflecting the consumer's patterns as 13% is from home improvement & furnishings led by Lowe's, 11% comes from grocery & warehouse clubs led by Costco and 18% comes from Restaurants, specialty foods and entertainment led by Dunkin Donuts and Jamba Juice.

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(Kimco Investor Presentation)

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(Kimco Investor Presentation)

KIM's dividend checks off all the boxes when I look at dividend stocks. They have a great yield at just over 6%, their payout ratio of 71.79% leaves a lot of room for growth and Kim has a 9-year track record of increasing their dividend for shareholders. This is a dividend that should be welcomed in any portfolio. Investors can count on continuous dividends even when times are rough and a tested management team who can face adversity and not crack under the pressure.

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(Source: Seeking Alpha)

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(Source: Seeking Alpha)

Brookfield Property Partners is a well-diversified REIT delivering a powerful dividend

Brookfield Property Partners operates across five segments in the real estate sector consisting of office, retail, multifamily, hospitality and other opportunities across their L.P investments. BPY owns, develops and manages office properties across the globe from New York to South Korea. Currently they have 282 properties with 138 million square feet of commercial space. Their core office portfolio consists of 143 premier properties which are considered class A assets with a 93.3% occupancy rate across 96 million square feet at an average 8.4-year lease term. On the retail side BPY has 168 locations predominantly located within the United States totaling 152 million square feet of space. Their core retail portfolio represents 8% of the high-quality retail space within the United States. The core portfolio within their retail business currently has 123 best in class malls and urban retail properties which represents 121 million square feet with a 95.3% occupancy rate.

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(Source: Brookfield Property Partners Corporate Profile May 2019)

On the L.P side of BPY's portfolio they operate 19,454 multifamily units which have 58,000 apartments across 40 geographically diverse marketplaces. Within the hospitality sector BPY has 123 assets and operates 25,185 rooms. BPY also has their hands in student housing with 49 properties, 96 self-storage properties and 357,000 square feet of logistics space. All of these factors make BPY an interesting pick as they are generating revenue from all aspects of owning and operating physical real estate.

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(Source: Brookfield Property Partners Corporate Profile May 2019)

BPY offers investors with a large dividend just under 7% which has grown over the past 7 years. For under $20 per share investors get a well-run company with diverse physical real estate assets and a strong dividend. The business landscape and human tendencies have changed as technology has advanced but the one thing that hasn't been disrupted is the need for real estate. BPY checks off all of the boxes and is positioned to generated profits and dividends for years to come.

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(Source: Seeking Alpha)

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(Source: Seeking Alpha)

Stag Industrial Inc. rounds out my four real estate picks moving away from the glitz and glamour and focusing on industrial properties throughout the United States.

STAG focuses on acquiring, operating and leasing industrial properties across the U.S. While they don't have the glitz of high-end office buildings or luxury retail spaces STAG offers a critical component to the U.S infrastructure. Organizations often need warehouse space for storage and logistical operations and STAG has a portfolio of 395 industrial buildings across 38 states. Stag has leased 45 million square feet since they went public. E-commerce currently accounts for 10% of U.S retail sales and is expected to go to 23% by 2025. That one statistic should keep the leases occupied and fuel growth in the coming years for STAG. They currently have 359 tenants with an average lease term of 4.9 years. Their industrial properties consist of warehouse, distribution and manufacturing facilities.

A screenshot of a cell phone Description automatically generated (Source: Stag Industrial Spring 2019 Investor Presentation)

STAG's dividend offers investors a monthly dividend which has grown over the past 8 years. In 2013 STAG changed its dividend structure from quarterly to monthly and has increased the dividend on an annual basis. With a dividend yield just under 5% and payouts on a monthly basis investors who reinvest the dividends can sit back and reap the benefits on compounding quicker than with quarterly dividend payers. STAG also has provided annual increases on the dividend over the past 8 years and with a payout ratio of 83.33% they have room to continue this trend.

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(Source: Seeking Alpha)A screenshot of a cell phone Description automatically generated

(Source: Seeking Alpha)

Conclusion

As an investor who is looking to add quality companies and diversify their dividend portfolio real estate is going to become one of my focal points. APLE, BPY, KIM and STAG are four prospects that may eventually be added in the future. I like physical real estate and if I can generate dividends without the headaches of actually owning the physical asset that's just music to my ears. These four companies provide a well-balanced real estate portfolio for any investor and provides monthly dividend income. While other REITS focused on mortgages offer large dividends I feel it's important to diversify and own quality REITS which focus on owning physical assets as protection. Three of these companies have over 5 years of increasing their dividends and they all own world-class assets in their respective fields. I plan on compounding my way into retirement and adding companies such as APLE, BPY, KIM and STAG may just be what the doctor ordered.

Disclosure: I am/we are long APLE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: I am not an investment advisor or professional. This article is my own personal opinion and is not meant to be a recommendation of the purchase or sale of stock. Investors should conduct their own research before investing to see if the companies discussed in this article fits into their portfolio parameters.


I have a buy order in for APLE which may be executed upon the publication of this article. I am also bullish on BPY, KIM and STAG and may add them in the future.