Top Stocks Worth Investing Now: Realty Income Corp. vs. Agree Realty Corporation
All Right, Let's Dish on Agree Realty and Realty Income:
Are you on the hunt for a steady income stream or a property powerhouse? Let's examine the net lease REITs Agree Realty and Realty Income. Both are contenders in the real estate game, but they've got their differences, so listen up!
What's the Deal with Agree Realty and Realty Income?
At the root of their business models, these guys focus on net lease properties, which are mostly occupied by a single tenant. This setup gives the tenants control over the properties and reduces the landlord's risks since they don't have to deal with day-to-day maintenance.
Although a single property can be a gamble, over a substantial enough portfolio, the risk gets lower.
Realty Income, the industry titan, boasts over 15,600 properties under its roof. Agree Realty, though smaller, rocks a solid portfolio of approximately 2,400 properties. But size isn't the only differentiator between these two portfolios.
Agree zeroes in on retail properties in the US, while Realty Income's portfolio is roughly 75% retail, with industrial and other assets accounting for the remaining 25%. The "other" category includes intriguing investments like vineyards, casinos, and data centers, leading to a more diversified portfolio. Realty Income's international footprint is also larger, with investments in several European countries.
Thanks to Realty Income's mammoth size, it takes a lot more transaction volume to make a dent in their financials. Their diversification also gives them more options for making new investments.
Business Nuts and Bolts
From a business fundamentals perspective, Agree is smaller and focused on growing its core retail business, while Realty Income is larger and more diversified. This dichotomy has resulted in pretty disparate valuations.
Dividend Yield or Growth?
Agree's dividend yield typically hangs around the industry average of 4.1%. Given the higher 5.8% yield offered by Realty Income, it's clear investors are willing to pay a premium for Agree.
If you're all about boosting your portfolio's income, Realty Income has got your back. However, this comes at a cost—growth. Agree is anticipating adjusted funds from operations (FFO) growth of 3.6% at the midpoint of its 2025 guidance. Realty Income's growth projection only reaches 2.1% at best. If you prefer a REIT that's growing faster, Agree is the way to go.
There's a secondary impact on the growth front. Realty Income's dividend has increased by about 4.3% each year, on average, over the past 30 years. That's nothing to sneeze at, but if adjusted FFO only grows by 2% or so, expect lower dividend increases in the near future.
Agree, on the other hand, leaves more room for increasing its dividend. It's been upping its dividend by an average of 5.5% annually over the past decade. While the near-term increases might dip below that figure, they'll still likely be higher than Realty Income's growth. If you lean towards quicker-growing dividends, you'll dig Agree.
What are You after?
In the end, both Realty Income and Agree Realty are solid net lease REITs, making them appealing for dividend investors. But they're not identical.
If you're after income and/or diversification, Realty Income is the more likely winner. If you prefer faster-growing businesses and dividends, you'll likely set your sights on Agree.
When considering investing in real estate, both Agree Realty and Realty Income are net lease REITs worth examining for a steady income stream or as a property powerhouse. Agree Realty, while smaller, focuses primarily on retail properties in the US, while Realty Income's diversified portfolio includes approximately 75% retail, with industrial and other assets accounting for the remaining 25%. Realty Income's size allows for more transaction volume and diversified investment opportunities, which may attract some investors. On the other hand, Agree Realty offers a faster-growing business and dividends, making it a more appealing choice for those seeking quicker growth. From a finance perspective, these REITs cater to dividend investors, but with distinct differences that should be carefully considered when investing money.
