Here are six real estate investment trusts owned by billionaires like Ken Griffin and Jim Simons that pay dividends monthly.
By John Dobosz, Forbes Staff
It’s no secret that dividends are highly prized by investors because they provide reliable income and a source of investment returns, even when stock prices are falling. Most dividend-paying stocks kick out cash dividends every three months, but a much smaller subset of a few dozen stocks pay on a monthly basis, providing a faster flow of income, or a quickened pace of compounding if investors reinvest dividends into additional shares of stock.
Most U.S.-listed stocks paying monthly dividends are either real estate investment trusts (REITs), business development companies, or oil and gas royalty trusts. These so-called “pass-through” entities do not pay tax on the corporate level because they distribute nearly all their income as dividends, which are taxed as ordinary income for shareholders who receive them, if the REITs are not held within an individual retirement account.
Like rent checks earned every month from rental properties, several of the worlds’ top billionaire investors have been scooping up monthly dividends from REITs that specialize in different niches of the property market, including shopping centers, office buildings, distribution centers and warehouses, recreational facilities, and nursing homes.
Sharply higher borrowing costs are not a friend of REITs. They increase interest cost on new debt and could adversely impact the ability to refinance existing debt, sell assets, and limit acquisition and development activities. Nonetheless, even as rising interest rates present headwinds for real estate, REITs remain ideal securities for income-oriented investors and for anyone interested in generating total return from dividends and long-term capital appreciation potential.
Regarding the importance of dividends in total return, pioneering female income investor Geraldine Weiss, longtime editor of Investment Quality Trends, was fond of saying, “We all hope for capital gains, but the only thing we can really count on is the dividend.”
The six REITs presented below are all monthly dividend-payers with annual yields ranging from 3.3% to 7.6%, making them good candidates for those looking for steady retirement income. All have payouts comfortably below their cash flow and are trading at discounted valuations relative to history. In addition, the most recent U.S. Securities and Exchange Commission filings show significant ownership by highly skilled billionaire investors.
Agree Realty (ADC)
Dividend Yield: 4.8%
Market Capitalization: $5.9 billion
Billionaire Ownership: Ken Fisher, Bruce Flatt, Ken Griffin, Ray Dalio, Steven Cohen, Jim Simons, Israel Englander, Clifford Asness
Bloomfield Hills, Mich.-based Agree Realty (ADC) is focused squarely on retail. It owns, acquires, develops, and manages net-lease properties rented to national retail tenants that include Walmart, Dollar General, Tractor Supply, Best Buy, Dollar Tree, and Kroger. Revenue is on the rise, expected to grow 20% this year to $517.2 million, with funds from operations up 2% to $3.95 per share. REITs are traditionally valued as a multiple of funds from operations (FFO), which differ from earnings in that they do not include the impact of interest, taxes, depreciation, or gains/losses on the sale of properties. Agree Realty trades at 15.1 times expected FFO, which is a 21% discount to its five-year average price/FFO ratio of 19.2. With a debt-to-equity ratio of 0.43, Agree is not stressed financially.
With ADC shares down 18% from their February high, it’s a clear sign of bullishness that company insiders are buying the stock hand-over-fist. Five different officers and directors, including the chief financial officer, purchased a total of $4.56 million worth of stock in the month of August. Executive Chairman Richard Agree personally ponied up $1.9 million to buy 30,000 shares. Billionaire investors have also shown a strong appetite for Agree. Israel Englander’s Millennium Management hedge fund reported new buys in the first and second quarters of 2023 and now owns 1.02 million shares of ADC, representing 1.1% of outstanding shares.
Phillips Edison & Co. (PECO)
Dividend Yield: 3.3%
Market Capitalization: $4.0 billion
Billionaire Ownership: Jim Simons, Clifford Asness, Ken Griffin, Ken Fisher
Phillips Edison & Co. (PECO), a midcap REIT out of Cincinnati, Ohio, specializes in ownership of shopping centers anchored by grocery stores. This REIT was founded in 1991 by Jeffrey Edison and Michael Phillips. Mr. Edison is the current chairman and chief executive officer of Phillips Edison, which went public in July 2021, and he owns 335,000 of the 117.3 million shares outstanding.
PECO owns and operates a $6.2 billion national portfolio of 291 grocery-anchored shopping centers clustered in Florida, the Eastern Seaboard, the Midwest, and along the Pacific coast. Top tenants as a percentage of total revenue are Kroger (6.2%), Publix (5.8%), Albertsons (4.1%), Koninklijke Ahold Delhaize N.V. (3.9%), and Walmart (2%). Revenue this year is expected to grow 6.6% to $597.5 million, with funds from operations up 6% to $2.28 per share.
Over the past 12 months, Phillips Edison generated free cash flow of $1.29 per share, which is comfortably above $1.12 per share in annual dividends, which are paid at a rate of $0.0933 per month, good for a dividend yield of 3.3% at current prices. Dividend growth is also encouraging. Since its IPO two years ago, PECO has hiked its monthly payout at a 4.8% annual rate.
The appealing fundamentals of PECO are nicely complemented by insider buying and billionaire ownership. On May 16, board member Leslie Chao laid out $292,000 to acquire 10,000 shares of PECO. Billionaire Jim Simons of Renaissance Technologies reports ownership of 187,000 shares, Clifford Asness of AQR Capital holds 14,000 shares, and Ken Griffin’s Citadel reports a stake of 7,000 shares. Ken Fisher owns 9,000 shares.
Realty Income (O)
Dividend Yield: 5.4%
Market Capitalization: $40.4 billion
Billionaire Ownership: Ken Griffin, Ray Dalio, Jim Simons, Israel Englander, Clifford Asness
With a market capitalization north of $40 billion, San Diego, Calif.-based Realty Income (O) is the biggest name in this group of monthly dividend payers. It owns 13,100 retail, industrial, and agricultural properties leased to 1,300 tenants in 85 separate industries, allowing Realty Income to generate stable cash flow and deliver consistent monthly dividends. The current property portfolio includes high-quality real estate in all 50 states, as well as Puerto Rico, the United Kingdom, Spain, Italy, and Ireland.
Realty Income has paid steadily rising dividends over its entire 54-year operating history, and dividend growth has outpaced inflation. Realty Income has hiked its dividend 5.3% annually over the past 10 years, and 4.7% annually since its initial public offering in 1994. Dividends of $3.07 per year are comfortably supported by $4.29 in free cash flow per share and provide investors with a current dividend yield of 5.4%.
Revenue has grown 21.5% annually over the past 10 years and is seen rising 18% to $3.9 billion in 2023. Funds from operations are expected to increase 2% to $4.12 per share. At 13.5 times FFO, Realty Income trades 25% below its five-year average price/FFO multiple of 18.1. Debt is manageable at 63% of equity.
The value of Realty Income was compelling enough for Israel Englander’s Millennium Management to establish a new position of 1.28 million shares at a cost of $60.92 per share in the second quarter of 2023—a cost basis 7% above the current stock price just below $57 per share. Jim Simons of Renaissance Technologies bought 378,000 shares during the same period at similar prices. With smaller stakes, Clifford Asness of AQR owns 97,000 shares, and Ray Dalio’s Bridgewater holds 90,000 shares.
STAG Industrial (STAG)
Dividend Yield: 4.2%
Market Capitalization: $6.3 billion
Billionaire Ownership: Israel Englander, Bruce Flatt, Ken Griffin, Steven Cohen, Clifford Asness
Boston-based STAG Industrial (STAG) was founded in 2010 and specializes in owning and managing huge distribution centers and warehouses along interstate highways. STAG owns 561 buildings in 41 states with approximately 111.6. million rentable square feet. Accounting for 2.8% of $654.4 million in 2022 revenue, Amazon.com is the company’s largest tenant. Other major clients include American Tire Distributors, Hachette Book Group, Tempur Sealy, DHL, FedEx, Penguin Random House, and Ford Motor Company.
Analysts who follow STAG expect this year’s revenue to rise 6.4% to $696.5 million, and FFO to grow 2.3% to $2.26 per share. At 14.9 times current year’s FFO, STAG trades 9.3% below its five-year average price-to-FFO ratio of 16.0. Funds from operations have grown at an 18.8% compound annual rate over the past five years, and free cash flow has increased 18.9% annually over the same stretch of time.
Billionaires are buyers. Israel Englander’s Millennium Management has been the most bullish, taking down 1.1 million shares in the second quarter and now owns 0.62% of STAG’s outstanding shares. Clifford Asness owns 322,000 shares, Ken Fisher holds 303,000 shares, and Ken Griffin’s Citadel owns 90,000 shares. Bruce Flatt’s Brookfield doubled its stake in the second quarter and now owns 48,000 shares.
EPR Properties (EPR)
Dividend Yield: 7.6%
Market Capitalization: $3.3 billion
Billionaire Ownership: Ken Griffin, Jim Simons, Israel Englander, Clifford Asness
Founded in 1997, Kansas City, Mo.-based EPR Properties (EPR) owns a $5.4 billion portfolio of specialty properties concentrated in entertainment, education, and recreation. Properties include 172 movie theaters, 67 charter schools, 41 early childhood centers, 25 golf entertainment complexes, 11 ski parks, and five water parks. EPR also owns one gaming property, Resorts World Catskills casino and resort in Sullivan County, N.Y. Largest tenants as a percentage of 2022 revenue are AMC Theatres (13.8%), Topgolf (13.7%), Regal Entertainment (12.7%), Cinemark (6.1%), and Vail Resorts (5.1%).
EPR’s revenue this year compared to 2022 is expected to jump 18.6% to $586.3 million, and FFO is expected to grow 7.7% to $5.05 per share. Priced at 8.7 times expected 2023 FFO, EPR trades 26.3% lower than itis five-year average price/FFO ratio of 11.8. It also trades 26.5% below its five-year average enterprise value-to-Ebitda ratio of 17.0.
EPR suspended its dividend in July 2020 after the onset of the Covid-19 pandemic but reinstated it one year later in July 2021, and the monthly payout has grown 4.9% annually over the past two years. Yielding 7.6%, EPR trades ex-dividend on August 30 for its next monthly payout of $0.275 per share.
Insiders are nibbling at the stock. On June 13, company director Caixia Ziegler bought 500 shares at $45.14 apiece. Among billionaire investors, Israel Englander and Ken Griffin both reduced their stakes in the second quarter but still own 675,000 and 477,000 shares, respectively. Jim Simons’ Renaissance Technologies holds 344,000 shares, and Clifford Asness of AQR reports owning 322,000 shares.
LTC Properties (LTC)
Dividend Yield: 7.2%
Market Capitalization: $1.3 billion
Billionaire Ownership: Ken Griffin, Jim Simons, Clifford Asness
Westlake Village, Calif.-based LTC Properties (LTC) invests in senior housing and health care properties, primarily through sale-leaseback transactions, mortgage financing, and structured finance deals that include mezzanine lending. Its portfolio includes 213 properties in 29 states with 29 operating partners. Based on gross real estate investments, the portfolio is composed of approximately 50% senior housing and 50% skilled nursing facilities. Based on each tenant’s share of 2022 revenue of $128.2 million, LTC’s largest tenants were Prestige Healthcare (14%), ALG Senior (10.4%), Brookdale Senior Living (8.9%), and Anthem Memory Care (6.2%).
LTC has been paying dividends since its inception in October 1992, and the payout has grown 2.4% annually over the past decade. Even though growth is not overwhelming, LTC’s dividends, currently paid at the rate of $0.19 per month, give the REIT a meaty yield of 7.2%. Annual dividends of $2.28 per share are covered by $2.54 in free cash flow per share over the past 12 months. Revenue this year is expected to creep higher by 1% to $129.1 million, and funds from operations are seen rising 2.7% to $2.63 per share. At 11.9 times current-year FFO, LTC trades 14.4% below its five-year average price/FFO ratio of 13.9.
Clifford Asness’ AQR hedge fund boosted its LTC holdings by 89% to 34,000 shares in the second quarter of 2023, while Jim Simons of Renaissance Technologies acquired 21,000 shares at $35.47 per share in the second quarter, and now owns 68,000 shares of LTC. Ken Griffin’s Citadel reports a small stake of 5,000 shares.
John Dobosz is a senior editor and editor of Forbes Billionaire Investor newsletter.
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