Being a landlord and renting out property is one of the oldest ways in which you can earn a passive revenue stream. And these days, you do not have to purchase a home to get a piece of the action.
Look for real estate investment trusts, these are publicly traded businesses that own income-generating real estate.
REITs collect their rent from real estate and pass it along to the shareholders. That means traders do not have to be concerned about having to screen tenants, chasing down late payments or fix damages. Instead, they just sit back and collect the dividend checks when they choose a winning REIT.
Of course, the corona pandemic did affect some commercial real estate. And all REITs aren’t the same. If you’re a landlord for the e-commerce goliath Amazon, for example, you shouldn’t have any problems collecting a consistent stream of rental income.
With that in mind, let us take a look at the two REITs that are currently paying large dividends to traders — one might be worth jumping on with some extra cash you have laying around.
The first one is STAG Industrial, it is a REIT that operates and owns single-tenant industrial real estate throughout the America. Its largest tenant is Amazon.
The company’s portfolio has 517 buildings that totals approximately 103 million square feet that can be rented throughout 40 states.
Note that 434 of the 517 real estate properties are warehouses, which is a crucial part of e-commerce.
Moreover, a tenant survey last year revealed that about 40% of the REIT’s portfolio has e-commerce activity.
Since the business went public in 2011, it has paid out a higher dividend every year.
While most dividend-paying businesses follow a distribution schedule that is quarterly, STAG Industrial pays investors every month. The monthly dividend rate currently stands at 12.08 cents each share, which translates to a yearly yield of 3.2%.
STAG Industrial shares have increased 50% year to date. If you do not feel comfortable choosing an individual stock in this elevated market, you could always build a diversified passive earnings portfolio automatically by just investing your spare change.
When it comes to paying out monthly dividends, one business stands out above the rest— Realty Income (O).
Realty Income has been paying out uninterrupted monthly dividends since it was created in 1969. That is 616 consecutive dividends paid out each month.
Better yet, since it went public in 1994, it has had 114 dividend increases.
Realty Income enjoys a diverse portfolio of almost 11,000 commercial properties that are located in all 50 states, the UK, Puerto Rico and Spain. It leases them to about 650 tenants operating throughout 60 industries.
This means even if one industry or tenant enters a downturn, the effect on company-level financials will most likely be limited.
For example, while Realty Income rents out some real estate to AMC Theaters, whose company was hurt by the pandemic — it also has FedEx, Walmart and Walgreens as some of its top renters. And these companies turned out to be, for the most part, pandemic-proof.
Earlier in the week, the REIT raised its monthly cash dividend up to 24.65 cents per share, which gave the stock a yearly dividend yield of 4.4%.
Author: Blake Ambrose