It’s done so every year since it began paying a dividend in 1994, which puts its streak at 29 years and counting. Even more impressively, it has boosted its dividend for 104 consecutive quarters – that’s 26 years, for those not doing the math at home.

The company pays dividends monthly (it even calls itself “The Monthly Dividend Company”), and thanks to a drop in its stock price this year, it sports a 6% yield.

But can investors expect this nearly three-decade streak to continue? Or do they have to worry that the stock price decline is signaling a cut in the dividend?

Realty Income is a real estate investment trust, or REIT. It owns more than 13,000 retail properties in the U.S. and another 300 across Europe.

Walgreens and Dollar General are its largest tenants. Other well-known names include Dollar Tree, 7-Eleven and Wynn Resorts.

Since Realty Income is a REIT, we’ll look at funds from operations (FFO), which is the figure REITs use to measure their cash flow.

Realty Income’s FFO has been on a steady march higher.

You can see FFO has been rising… and is expected to jump again next year.

And even though the company has been consistently raising its dividend, FFO has more than kept up with the rising payouts.

This year, Realty Income is forecast to pay shareholders $2.2 billion, which is 85% of its FFO. Next year, that figure is projected to fall to 70%. That means for every dollar of cash flow the company generates, it will pay out an estimated $0.70 in dividends.

Realty Income has one of the best dividend-raising track records you’ll find. Combined with plenty of cash flow to support the dividend, that means Realty Income’s 6% yield is very safe.

Dividend Safety Rating: A

If you have a stock whose dividend safety you’d like me to analyze, leave the ticker symbol in the comments section.

You can also take a look to see whether we’ve written about your favorite stock recently. Just click on the word “Search” at the top right part of the Wealthy Retirement homepage, type in the company name and hit “Enter.”

Also, keep in mind that Safety Net can analyze only individual stocks, not exchange-traded funds, mutual funds or closed-end funds.

The post Realty Income: Can This Dividend Aristocrat Afford Its 6% Yield? appeared first on Wealthy Retirement.

The New York City-based company has 1,057 properties across 48 states, including Lafayette Pavilions in Lafayette, Indiana; Wallace Commons in Salisbury, North Carolina; and Golf Road Center in Schaumburg, Illinois.

There’s nothing like a fat double-digit yield to excite income investors. But can shareholders expect Necessity Retail to continue to pay such an attractive dividend?

Let’s look at the numbers.

To determine dividend safety in REITs, we look at a measure of cash flow called funds from operations, or FFO.

Wall Street expects to see a big jump in FFO when the company releases its full-year figures for 2022, which it should do around the same time you’re reading this email. Analysts expect FFO to rise from $95.3 million to $128.2 million. In 2023, FFO is forecast to rise to $135.6 million.

Assuming the company pays $114.3 million in dividends (as expected), the payout ratio will be 89%. If the dividend stays the same next year, based on the company’s 2023 estimates, the payout ratio would drop to 84%.

For a REIT, anything below 100% is good. REITs must pay out at least 90% of their earnings in dividends. FFO is not the same as earnings, but because of this rule, REITs often pay out most of their FFO in dividends as well.

Necessity Retail REIT began paying a dividend in 2018. Unfortunately, the company cut the dividend in 2020 and has not raised it since then. The current dividend is $0.2125 per quarter, which comes out to 12.7% annually.

We never like to see a dividend cut. That’s an automatic downgrade. But considering how solid the financials look, the dividend appears fairly safe.

Dividend Safety Rating: B

If you have a stock whose dividend you’d like me to analyze, leave the ticker symbol in the comments section.

Be sure to check whether I’ve written about your favorite stock recently. Click on the word “Search” in the top right part of the website homepage, type in the company name and hit enter.

The post A Small Cap With a 12.7% Yield appeared first on Wealthy Retirement.

While some malls are struggling, Simon Property Group‘s (NYSE: SPG) more than 400 malls in 24 countries are doing okay. Simon specializes in high-end properties that tend to be more resistant to downswings in retail.

Simon’s properties include…

• Chicago Premium Outlets in Aurora, Illinois
• Lenox Square in Atlanta
• 10 malls in Japan.

The company pays a $1.80 quarterly dividend, which gives it a strong yield of 5.9%. But can dividend shoppers rely on Simon paying at least that much each year?

Simon Property Group is a real estate investment trust, so we look at funds from operations (FFO) as the measure of cash flow to determine the safety of the dividend.

FFO in 2022 is estimated to be $3.8 billion. That’s lower than the previous year’s $4.5 billion and pre-pandemic 2019’s total of $4.3 billion.

That’s not what we want to see. Safety Net frowns upon declining cash flow.

The good news is 2023’s figure is forecast to be $4 billion.

The company will report fourth quarter results on February 6, so we’ll get 2022’s final FFO numbers and perhaps guidance for 2023.

The FFO numbers are a little all over the place rather than the steady growth we’d prefer to see. But, most importantly, current FFO does still cover the dividend.

In 2022 and 2023, the payout ratio based on FFO is expected to be right around 60%. That’s a comfortable number in that even if FFO were to decline again, the dividend would still be affordable.

Simon Property Group has a pretty solid dividend history… except when the spit hits the fan. It slashed its quarterly dividend in 2020 from $2.10 to $1.30. Though the company has increased it since then, the dividend is still below where it was prior to 2020.

It did the same during the global financial crisis when in 2009 it went from paying $0.90 per share in cash to $0.09 per share in cash and $0.81 per share in stock. Then the next quarter, the company paid $0.12 per share in cash and $0.48 per share in stock.

While Simon Property Group can afford the dividend now, we know that in times of crisis, we can’t rely on the dividend. And if FFO does not improve the way Wall Street expects it to in 2023, we’ll have to take a very close look at the dividend to see if a cut is on the way.

The dividend is likely safe for the next few quarters, but the long-term prognosis is questionable.

Dividend Safety Rating: D

If you have a stock whose dividend you’d like me to analyze, leave the ticker in the comments section.

And be sure to check to see whether I’ve written about your favorite stock recently. Just click on “Search” at the top right part of the page and type in the name of the company.

The post Simon Says This Dividend Could Be in Trouble appeared first on Wealthy Retirement.

As fulfilling as it was, it was never an easy industry to work in.

Today, we’re going to explore whether it – and one company in particular – is a worthwhile industry to invest in.

The challenge with assisted living care facilities (and the companies that run them) is that steady revenue is contingent on keeping rooms full.

This problem reared its head like never before during the pandemic, which struck retirement home occupancy particularly hard.

A company that knows this struggle well is real estate investment trust (REIT) Omega Healthcare Investors (NYSE: OHI), which owns the real estate for 944 assisted living and skilled nursing facilities in the U.S. and U.K.

It makes money by collecting rent checks from assisted living facilities that rent its properties.

When we rated Omega a little over a year ago, it earned itself an “A.” Back then, it sported a 7.2% yield. Now it has an 8.6% yield.

That’s an attention-getting number. But with the retirement home market still struggling through the pandemic, it’s worth looking to see whether this dividend is still as safe as it was before…

The company recently said occupancy levels in its assisted living facilities are still meaningfully below pre-pandemic levels. And it’s not hard to see why…

As of March 2021, nearly 1 in 12 long-term care residents died from COVID-19. For nursing homes alone, 1 in 10 residents lost their lives to COVID-19.

Plus, with new variants popping up constantly, it’s harder to justify sending your loved ones to live where you’re unsure they’re safe.

At the end of the day, assisted living facilities need to fill beds to pay landlords like Omega. And if their revenues are disrupted dramatically, it will impact Omega.

And that’s exactly what’s playing out right now…

Seeing as Omega is a REIT, it’s more beneficial to look at its funds from operations (FFO) rather than earnings or cash flow.

The company had been building up its FFO for years. It recorded $444.3 million in 2017, $587.4 million in 2018 and $640 million in 2019… and then it saw a dip to $555.9 million in 2020.

In 2021, Omega’s estimated funds from operations rebounded to $755.1 million.

However, it achieved that rebound by applying security deposits, issuing letters of credit and using other financial avenues in order to help tenants make rent.

Omega has cautioned that once those options dry up, FFO will not look so bright.

In more bad news, Omega’s payout ratio was 110.15% in 2020. That’s above the 100% line SafetyNet Pro is okay with for REITs, so Omega received a penalty there.

But there’s also a decent amount of good news…

Omega shrank its payout ratio to an estimated 84.81% in 2021, and it’s never cut its dividend over the last 10 years (but it has also never raised it). Furthermore, dividends rose from $612.3 million in 2020 to an estimated $640.4 million in 2021.

All in all, Omega is a mixed bag.

It faces a looming threat of tenants soon not being able to pay their rent… and there’s no telling when the industry as a whole will bounce back.

Omega has been successful in diversifying its business to pump up its funds. It also supplemented some of its loss by selling off a couple of its facilities – placating investors for now.

Some of the solutions the company came up with to its problems feel more like Band-Aids rather than real fixes…

In the short term, however, it looks like this dividend is moderately safe.

Dividend Safety Rating: C

If you have a stock whose dividend safety you’d like analyzed, leave the ticker in the comments section.

You can also check to see whether we’ve written about your favorite stock recently. Just click on the magnifying glass in the upper right corner of the Wealthy Retirement homepage and type the company name in the box.

Good investing,

Brittan

The post Can This 8.6%-Yielding REIT Outmaneuver COVID-19? appeared first on Wealthy Retirement.

Can REITs hold up in the face of higher rates? After all, higher rates raise their borrowing costs, and REITs borrow a lot of money in order to buy properties.

I believe REITS will be just fine. In fact, better than fine.

Many REITs have pricing power as inflation rises – meaning they can increase their prices along with inflation. For example, student housing REITs have a captive audience. For many students, there aren’t tons of options for where to live, especially if they want to be close to school.

Perhaps most importantly, the evidence doesn’t show that REITs act poorly when interest rates are climbing. Interestingly, they perform right in line with the S&P 500 ahead of interest rate hikes, when people are concerned about the effect of higher rates.

But once the rate hikes hit, REITs actually do quite well.

It’s a classic Wall Street reaction. Investors worry about some negative catalyst, and then when the catalyst actually hits, stocks rally. It’s like how stocks often run higher right after a war starts.

Looking at the interest rate hikes going back to 1994, we can see that REITs outperformed the S&P 500 in the following six months three out of four times. The average outperformance was 3.9%. That number would likely be higher if not for 1999, which led into the top of the dot-com bubble when investors were way more interested in buying tech stocks with no revenue instead of dividend-producing REITs. During that period, REITs underperformed by 17.7%.

The other periods, starting in 1994, 2004 and 2015, saw REITs outperform the broad market by 7.9%, 18.2% and 7.0%, respectively, for an average of 11%.

Which REITs should you focus on?

I previously mentioned student housing. I believe that’s a great sector to be in. Along with student housing, self-storage and industrials are expected to have the most funds from operations (FFO) growth over the coming years. FFO is a form of cash flow used by REITs.

I’m also a fan of healthcare REITs, as demand for healthcare is only going to increase. It’s important to keep in mind that healthcare REITs do not operate healthcare facilities, like hospitals and nursing homes. They’re simply the landlords of those institutions.

Here are some examples of stocks in each REIT sector that I just mentioned, along with their current dividend yields.

REITs belong in a diversified income portfolio, regardless of interest rates. As rates start to rise, you may hear chatter that exposure to interest rate-sensitive stocks like REITs should be reduced.

But the data does not show that. In fact, it shows just the opposite. If you don’t already own REITs, start exploring some and consider adding them to your portfolio in the near future.

Good investing,

Marc

The post Will REITs Crumble Because of Higher Interest Rates? appeared first on Wealthy Retirement.

It tells the tale of a woman whose “man’s been gone, for nigh on a year.” The woman has a couple of indiscretions during that period, and when her partner returns, she confesses everything.

While we never learn if they live happily ever after, the man does say repeatedly, “You are forgiven.”

Digital Realty investors, who have been used to nothing but stellar performance by the data warehouse real estate investment trust (REIT), got a bit of a shock last year.

Funds from operations (FFO), the measure of cash flow used by REITs, fell for the first time in years.

That is a sin that SafetyNet Pro has a tough time forgiving.

Digital Realty has 280 data centers in more than 20 countries on every continent except for Antarctica. Its data warehouses host servers from many of the largest companies in the world, including AT&T (NYSE: T), IBM (NYSE: IBM) and Clear Channel.

After several years of annual increases in FFO, Digital Realty saw a slight decline in 2020.

We never want to see cash flow declining. It makes SafetyNet Pro nervous that the company may not be able to afford its dividend if that decrease continues.

The fact that FFO is expected to increase significantly this year takes some of the pressure off.

So does the fact that even in 2020, Digital Realty’s payout ratio was below 100%, which means it created more FFO than it paid in dividends.

Last year, Digital Realty paid 91% of its FFO in dividends. For REITs, as long as the payout ratio is below 100%, we’re fine with it. And the fact that this year is expected to see a big increase in FFO makes us feel even better.

Finally, the company has a stellar track record when it comes to its dividend. It has not only continued to pay the dividend without a cut but also raised the payout per share every year for 15 years. Digital Realty currently pays $1.12 per share quarterly for a 3.2% annual yield.

Digital Realty has been rated “A” for dividend safety for a while. The 2020 dip in FFO caused some concern, but because of its strong track record and projected cash flow growth this year, like the protagonist in The Who’s song, it is forgiven.

Dividend Safety Rating: A

If you have a stock whose dividend safety you’d like me to analyze, leave the ticker symbol in the comments.

Good investing,

Marc

P.S. My book Get Rich with Dividends was recently ranked the No. 3 dividend investing book of ALL TIME by the website Financial Expert. I did a short interview with the publication after learning about the award. You can check it out here.

The post Will This Previously “A” Rated Stock Be Forgiven? appeared first on Wealthy Retirement.

– Mable Buchanan, Managing Editor

While the need for traditional retail and office space has declined significantly over the past year, the demand for warehouse space has boomed. Online retailers are stocking up to meet the growth in demand.

That’s where STAG Industrial (NYSE: STAG) comes in.

The REIT owns and manages industrial properties across the United States.

Its portfolio includes warehouses, fulfillment centers, storage units and other properties.

Typically, industrial REITs offer low dividend yields. They are seen as safe, long-term investments. The average yield is 2.55%.

Yet STAG pays $1.44 per share, yielding a whopping 4.63%.

Investors want to know… Is it safe?

A Dividend Raiser With Room to Grow

STAG has raised its dividend every year since it began paying one in 2011.

Since 2012, the company’s dividends have increased at an annual growth rate of 4.2%.

STAG has a diversified tenant base spread across many industries. Fewer than 25% of the company’s leases expire before 2023, ensuring a stable flow of income.

The company’s largest tenant is Amazon (Nasdaq: AMZN), and even it makes up only 2.9% of STAG’s yearly base rent.

In fact, STAG’s top 10 tenants together account for just 12% of its yearly base rent.

Meanwhile, e-commerce makes up 40% of STAG’s portfolio.

In 2019, e-commerce accounted for 11% of total retail sales in the United States. In 2024, it is estimated that 19.2% of retail sales will be e-commerce.

This shift should stimulate growth for STAG’s e-commerce-heavy tenant base, further reducing the possibility of defaults.

Investors have seen the benefits…

In the past five years, STAG’s funds from operations (FFO) have experienced robust growth driven by rising rental rates and property acquisitions.

The chart below depicts STAG’s FFO over the past five years.

As STAG’s FFO rises, its payout ratio falls. In 2020, STAG’s payout ratio was estimated to be 77.42%, down from 81.17% in 2019.

Since REITs are required by law to pay out 90% of their earnings in dividends, they often pay out all of their cash flow. That’s why SafetyNet Pro‘s payout ratio comfort zone is 100% for REITs.

With a low payout ratio and a history of dividend increases, we could see another dividend raise in the near future.

STAG’s varied portfolio base combined with its growing FFO make its dividend extremely safe.

Dividend Safety Rating: A

If you have a stock whose dividend safety you would like Marc to analyze, leave the ticker symbol in the comments section.

Good investing,

Kyle

The post Stock Up on an “A” Rated Dividend appeared first on Wealthy Retirement.

If that’s the case, SL Green Realty (NYSE: SLG) is certainly not acting like it.

The real estate investment trust (REIT) not only raised its dividend in December by 3% to $3.64 per share annually (SL Green pays $0.30 per share monthly) but also paid a $1.70 per share special dividend.

Additionally, it added $500 million to its stock buyback program, increasing it to $3.5 billion.

So is SL Green one of Gotham’s elite, or is it posturing like a poser waiting in line to get into one of New York’s hottest clubs?

Let’s get beyond the velvet rope and find out…

SL Green holds interests in 93 Manhattan buildings totaling 40.6 million square feet.

These days, it seems as if tumbleweeds are blowing through the concrete canyons of New York. Yet SL Green expects same-store net operating income to decline by only 1.5% to 2.5%.

Wall Street forecasts funds from operations (FFO), the measure of cash flow used by REITs, to drop to $508 million in 2020 from $605 million in 2019.

However, last month, management guided to $7.10 per share in FFO on 79 million shares outstanding for 2020, which equals $561 million.

In 2021, management’s guidance is FFO of $6.30 to $6.70 per share on 70.6 million shares outstanding. That comes out to $459 million in FFO.

In 2019, SL Green paid out $306 million in dividends for a payout ratio of 51%. The payout ratio will likely stay the same for 2020.

In 2021, I estimate that SL Green will pay out about $277 million in dividends as the share count is reduced. If management’s guidance is accurate, the payout ratio will be about 60%, which still leaves plenty of room to pay and raise the dividend.

The payout ratio is the percentage of cash flow that is paid out in dividends.

A Decade of Dividend Raises

SL Green cut its dividend in 2010. But unlike an ex-spouse, SafetyNet Pro forgives mistakes made more than 10 years ago.

Since then, SL Green has been a model dividend payer, boosting the payout to shareholders every year.

Despite the economic disaster in New York City, SL Green looks like it’s in pretty solid shape to continue to pay the dividend to its investors in 2021.

Dividend Safety Rating: B

If you have a stock whose dividend you’d like me to analyze, leave the ticker symbol in the comments section.

Good investing,

Marc

The post Start Spreadin’ the News – Is This 6% Yield Leaving Today? appeared first on Wealthy Retirement.

Regulations seem to change daily, many of the homes are at the mercy of Medicare for reimbursement and qualified labor is hard to find.

So despite 10,000 baby boomers turning 65 every day, investing in a nursing home is not a slam dunk.

I do like, however, the business of being a landlord to assisted living facilities like nursing homes.

If a nursing home intends to keep its doors open, it must pay its rent, plain and simple.

Omega Healthcare Investors (NYSE: OHI) owns the real estate for 957 assisted living facilities in 40 states plus one facility in the U.K.

It is a real estate investment trust (REIT). As a result, its funds from operations (FFO) is a more important metric to look at rather than earnings or cash flow.

The company’s FFO hasn’t been particularly impressive over the past few years, though it is rebounding strongly from dips in 2017 and 2018.

Last year, Omega generated $640 million in FFO and paid shareholders $564 million in dividends for a payout ratio of 88%.

This year, the company is forecast to report $649 million in FFO and pay $608 million in dividends, which equals a 94% payout ratio.

REITs must pay out 90% or more of their earnings. As a result, most pay dividends equal to most or even all of their FFO. So a payout ratio that high doesn’t bother me.

If it were more than 100%, it would receive a penalty from SafetyNet Pro. As long as it’s under 100%, it’s fine.

Omega Healthcare Investors has a strong dividend-raising track record, paying shareholders more dividends every year since 2004.

The fact that the company raised the dividend even when FFO fell a few years ago gives me added confidence that the dividend is safe.

With the dividend at $0.67 per share quarterly, the yield comes out to 7.2%. A yield like that – particularly one that is not in jeopardy – is not easy to find in this market.

The nursing home business might not always be consistent. But Omega Healthcare Investors’ dividend sure is.

Dividend Safety Rating: A

If you have a stock whose dividend you’d like me to analyze in this column, leave the ticker symbol in the comments section.

Good investing,

Marc

The post A Safe 7.2% Yield appeared first on Wealthy Retirement.

While malls were already facing stiff competition from online competitors, the pandemic temporarily shut retailers’ doors during the spring and many are still experiencing drastically reduced traffic.

So shareholders will be watching Simon’s earnings report closely to see whether its generous 7.7% dividend yield is sustainable.

Now, keep in mind, the company already cut its quarterly dividend in 2020 from $2.10 per share to $1.30. The reduction tarnished a solid annual dividend-raising track record going back to 2010.

But that all feels like ancient history. Can Simon Property Group maintain the $1.30 per share payout each quarter?

Not surprisingly, funds from operations (FFO) – a measure of cash flow used by real estate investment trusts (REITs) like Simon Property Group – is expected to be down sharply this year, hitting its lowest level since 2012.

Just prior to the pandemic, Simon Property Group’s FFO dipped. SafetyNet Pro is not a fan of declining cash flow for any reason, so Simon Property Group’s rating will be hit hard by the lower numbers in 2019 and 2020.

The good news is that because the company slashed its dividend earlier this year, it is forecast to pay only $1.9 billion in dividends. So even if FFO comes in lower than the expected $2.98 billion, the company should be able to afford the dividend for the rest of the year.

But what happens next year?

With Simon Property Group’s declining FFO and a recent dividend cut, the quantitative model that runs SafetyNet Pro suggests another reduction in dividends in the next 12 months.

Considering the state of brick-and-mortar retail, particularly in our big malls, I’d have to agree.

We’ll see whether the company reports anything to convince us otherwise when it releases its third quarter results on November 2.

Dividend Safety Rating: F

If you have a stock whose dividend safety you’d like me to analyze, leave the ticker symbol in the comments section.

Good investing,

Marc

The post Can This Mall Owner Maintain Its 7.7% Yield? appeared first on Wealthy Retirement.