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3 REITs to Supplement Your Social Security Income

The Motley Fool
The Motley Fool
 2022-01-13

Inflation has reared its ugly head, and the federal government has responded with a cost-of-living adjustment (COLA) raise of 5.9%, the largest in about four decades. That's welcome news to the 47 million or so retired Americans who depend on that monthly payment.

However, how to supplement that fixed income is an individual choice. It could be a while before interest rates make much impact on the minimal returns from such fixed-rate sources as CDs, bank and credit union savings accounts, and even bonds.

Investors who want to boost their yield while reducing risks in the stock market should consider real estate investment trusts (REITs). These companies are required by tax law to pass at least 90% of their taxable income on to investors -- income they generate as owners and/or operators of a wide range of real estate.

Here are three REITs to consider that not only have years of solid returns but have also raised their dividends each year for at least nine years, helping their investors keep up with rising prices over that span. As a bonus, each of these REITs is among the small group of REITs that pay monthly (instead of quarterly), adding to their appeal as a supplement to monthly Social Security payments .

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Agree Realty

Agree Realty (NYSE: ADC) has a portfolio of about 1,400 properties in 47 states that it leases to what it calls industry-leading, omnichannel retail tenants. This suburban Detroit-based REIT boasts compound annualized dividend growth of 5.5% over the past 10 years.

Agree is growing its portfolio as well as its payouts. The company invested about $343 million in 83 net-lease retail properties in the third quarter. That will add more cash flow to a portfolio that's now 99.6% leased, with the average lease having 9.5 years left to run. Plus, 66.9% of Agree's rent is from investment-grade retail tenants.

Agree Realty has been trading at about $69 a share and yielding about 3.95%. The monthly dividend for the Jan. 14 payout was $0.227 per share, a 9.8% increase from the year-ago month. Thus, a $10,000 investment in Agree Realty stock would buy you about 145 shares and pay you about $32.90 a month.

Realty Income

Realty Income (NYSE: O) has a portfolio of more than 11,000 properties occupied by 650 different clients in all 50 states, the United Kingdom, and Spain. This San Diego-based REIT is one of the most popular real estate investments on the market, in no small part because of 97 straight quarters of dividend increases atop a record of more than 50 years of not missing a monthly payout. That dividend has increased nearly 25% in the past five years

Realty Income has been trading at about $70 a share and yielding about 4.13%. The monthly dividend for the Jan. 14 payout was $0.2465 per share. Thus, a $10,000 investment in Realty Income stock would buy you about 143 shares and pay you about $35.20 a month.

The company is making moves to keep the momentum, investing a record $3.78 billion in its properties in 2021 (including its first in continental Europe), acquiring rival VEREIT, and spinning off its office properties into a new publicly traded firm called Orion Office REIT. The company also is projecting a 9.2% jump in 2022 in adjusted funds from operations (FFO), a critical measure of a REIT's cash flow.

STAG Industrial

STAG Industrial (NYSE: STAG) has a portfolio of 517 single-tenant industrial buildings spread across 40 states. This Boston-based REIT was founded in 2010 and went public in 2011. Since then, the company has posted nine straight years of dividend increases.

Signs point to more to come. The company bought 24 buildings in 3Q21, adding 4 million square feet to its portfolio, and was able to raise the rent by 14.7% on 3.7 million square feet in new and renewed leases in the quarter. Plus, 97% of the available space in the entire portfolio is leased, ensuring health income flow from a portfolio that has reached 103 million square feet.

STAG Industrial has been trading at about $44 a share and yielding about 3.24%. The monthly dividend for the Jan. 18 payout was $0.121 per share. Thus, a $10,000 investment in STAG Industrial stock would buy you about 227 shares and pay you about $27.50 a month.

Nothing is certain, but these are good choices to consider

REITs can nicely supplement the income from all those years in taxes that the typical retiree paid into Social Security, plus likely appreciation in share price. Each of these three choices could be a suitable place to put that strategy into play to help reduce the income uncertainty in your retirement years.

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Marc Rapport has no position in any of the stocks mentioned. The Motley Fool owns and recommends Stag Industrial. The Motley Fool has a disclosure policy .

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