Real estate investing is a proven way of steadily growing wealth, if the investments are well chosen and the investor is patient. And you don’t have to go buy a shopping center or apartment building to get involved.
A great way for everyday investors to get rich from real estate is to buy real estate investment trusts (REITs). These are companies that buy, sell, and manage pools of properties and have a tax-law obligation to pay out at least 90% of their taxable income in the form of dividends.
There are more than 200 publicly traded REITs. Here are two to consider that are in very different businesses but share this trait: In the past 10 years they’ve each easily bested the S&P 500 in total return, which combines dividend yield and price growth. they are Agree Realty (ADC 2.21%† in retail and Camden Property Trust (CPT 2.06%† in residential.
Here’s a look at each.
Agree Realty has a portfolio that as of Dec. 31 comprised 1,404 properties in 47 states, with 99.5% of those 29.1 million square feet under lease with remaining average lease terms of about 9.3 years.
Investment-grade tenants account for 67% of this retail REIT’s business. walmart accounts for 6.6% of Agree’s current rent flow, followed by Tractor Supply and Dollar General at 3.9% each. By sector, grocery stores lead with 10.5% of the base rent, followed by home improvement and convenience stores at 9.5% and 8% each.
The company is actively adding to its rent rolls. In 2021, it spent about $1.39 billion on 290 properties in 43 states. This year it plans to spend another $1.1 billion to $1.3 billion for more high-quality, net lease retail properties. Agree also is growing its use of ground leases, which it says offers superior risk-adjusted returns and now accounts for 14.3% of its annual base rents.
Agree Realty has been trading at about $64.20 a share and yielding about 4.13%. The monthly dividend for the March 14 payout was $0.227 per share, and the company has raised its dividend by about 6.51% over the past three years. The company grew its core funds from operations (FFO) by 10.9% to $3.58 a share in 2021. Its growing collection of reliable tenants in essential businesses positions it well to repeat that performance going forward.
Camden Property Trust
Camden Property Trust is a residential REIT with a current portfolio of 171 properties and 58,300 apartment homes. Camden focuses on newly developed Class A and updated Class B apartments in desirable urban and suburban settings in markets that are showing strong residential and job growth.
That portfolio is Sun Belt-heavy: 23 communities in Houston; 17 in Washington, D.C.; 15 each in Atlanta and Dallas-Fort Worth; 13 in Charlotte, NC; 12 at Phoenix; 11 in Orlando, Florida; and 10 each in Raleigh, North Carolina, and Austin, Texas.
It’s also profitable. Camden more than doubled earnings per share in 2021 from 2020 — $1.24 to $2.96 — while growing FFO by 10% from $4.90 to $5.39 per share. Occupancy ended the year at 97.1%, and leases signed in January averaged rental rate increases of 15.2%.
The $1.5 billion in liquidity the company reported at year’s end sets the stage for more acquisitions, and the company is already guiding revenues rising by 7.75% to 9.75% during the year, while expenses rise only about 3%. That should enable it to meet its projected FFO of $6.09 to $6.39 a share for 2022, up sharply from the $5.39 posted in 2021, and continue its strong performance for buy-and-hold investors.
These investments can do the heavy lifting
A $10,000 investment in Agree Realty at this point 10 years ago would now be worth $45,280. For Camden Property Trust, it would be $40,570. Plus you get to enjoy dividends that exceed the S&P 500’s yield of about 1.4% as these sources of passive income actively add to your accumulated wealth.