Back then, there were “widows and orphans” stocks sold by brokers to their clients with the certainty that they would pay dividends to feed the family and maybe even increase their price over time.
These were often public services, considered as safe as they are. Until they weren’t. (Two good examples: Michigan Consumer power in the 1980s and SCANA in South Carolina in recent years.)
Failed nuclear projects have ravaged businesses and their stocks, and tens of thousands of their own employees, retirees and others who relied on that income have lost most, if not all of it. In the case of SCANA, some of its leaders are probably going to jail. So much for these widows and orphans.
There are always reliable performing utilities to buy, of course, including Dominion Energy (NYSE: D), who picked up the pieces of SCANA in 2019, and Consumer energy (NYSE: CMS), successor to Consumers Power.
But why stop there? Public real estate investment trusts (REITs) can also be a place to buy safe investments. There are a few hundred of them, and although they all share the mandate to transmit 90%. Eight percent of their taxable income to shareholders, they have to have income to pass on, right?
So, let’s pick three with the credentials to be considered “widows and orphans stocks” in today’s self-service stock market. A “safe” REIT in this sense would be one that has a long history of paying dividends in a reliable manner. And a good place to find them is among the Dividend Aristocrats, a list maintained by the S&P Dow Jones Indices of S&P 500 companies that have paid and increased their core dividends for 25 consecutive years.
There are three REITs among the 66 actions on the 2020 list of dividend aristocrats: Real estate income (NYSE: O), Essex Real Estate Trust (NYSE: ESS), and Federal Real Estate Investment Trust (NYSE: FRT). Federal Realty has posted 52 consecutive years of dividend gains, followed by Real Estate Income at 27 and Essex Property Trust at 26.
Here is a little more on each.
Real estate income
Realty Income has provided shareholders with a compound average annual return (CAGR) of 15.3% since its listing on the New York Stock Exchange in 1994. The dividend itself has a CAGR of 4.4% during this period and was paid for 606 consecutive months and increased by 93 times. The return was 4.56% based on a February 17 share price of $ 61.71 The San Diego-based company was founded in 1969 and boasts itself as largest publicly traded net rental REIT by market capitalization, supported by a good quality balance sheet. Realty Income has over 6,500 long-term net lease properties with around 600 different tenants across 51 retail and other industries. Reuben Gregg Brewer of Millionacres explains here why Realty Income stock may seem relatively expensive right now. But for investors who are looking for predictable income more than growth, this is the definition of a safe REIT – for February and any other month.
Federal Real Estate Investment Trust
Federal Realty Investment Trust is based in Rockville, Maryland, and owns more than 100 properties with approximately 2,900 tenants occupying 24 million square feet in Silicon Valley, Los Angeles, Chicago, Boston, New York, Philadelphia, Washington, DC and Miami. Although it is primarily made up of retail businesses, it also has approximately 2,800 residential units.
Federal Realty was founded in 1962 and focuses on high quality retail tenants anchored in or near affluent areas of its eight markets. As Millionacres’ Reuben Gregg Brewer says in his review of this REIT, that, coupled with a strong balance sheet, gives its tenants and properties resilience in a shabby retail world.
Federal Realty has maintained its status as a dividend aristocrat by paying $ 4.22 in total dividends in 2020, up from $ 4.14 in 2019, $ 4.04 in 2018, and so on. He just declared a quarterly dividend of $ 1.06 payable April 15, which would set him in motion for another year of annual dividend increase if he did so quarterly this year.
Federal Realty was producing a respectable 4.15% based on its Feb. 17 closing price of $ 102.22 per share, which had collapsed to $ 64.11 as the pandemic deepened, but is still at about 21% of its 52-week high of $ 129.19.
Essex Real Estate Trust
Essex Property Trust is based in San Mateo, California, and went public in 1994 with a portfolio of 16 multi-family communities. Essex now owns 246 communities comprising approximately 60,000 apartments and six other properties in active development.The Essex portfolio is concentrated along the west coast including southern California, the San Bay area Francisco and the Seattle metropolis. It enjoys a total shareholder return of 3447% from its initial public offering until October 2020, compared to 1,097% for the S&P 500. Essex was down 3.12% at its closing price on February 17 of 266, $ 77 per share.
It’s still about 19% below its 52-week high of $ 329.74, but the company has had to make rent concessions, contributing to a 6.9% drop in funds from operations (FFO) from 2019 to 2020. And it may have to keep that until its markets recover.
Still, net income ended up 30.5% for the year. And Essex has maintained that strong dividend history, paying $ 2.078 per share in each quarter of 2020 after paying $ 1.95 per share in each quarter of 2019, and $ 1.86 per quarter of 2018, and so on. .
Millionacres net profit
Essex, Federal Realty, and Realty Income have a long history of managing their portfolios and balance sheets through economic ups and downs.
Whether the pandemic will prove to be a convulsion like no other for the retail and housing markets remains to be seen, but there are still plenty of reasons for optimism to view these three investments in real estate stocks as reasonably safe ports for investment income in a nearby country. – an environment of zero interest in really safe stuff, like CDs and other insured savings accounts.
Even without price growth, their constant payments still beat inflation. It’s about the size and reliability of the dividend, not so much the yield and the share price, after all.
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