With interest rates falling and the yield curve working towards a recession predicting inversion, investors start to look for safer stock market alternatives. Real estate investment trust (REIT) shares are one sector that typically does well when interest rates are falling. An added push that gives positive returns is quality REITs will grow their dividends. Buying shares in the month before the next dividend increase gets announced can add a boost to your income stock portfolio.
Buying shares before a dividend announcement is one strategy that can produce a quick start to a new REIT investment. Most REITs increase their dividend rate once a year, and then pay that new rate for the next four quarters.
From the way share prices act before dividend increase announcements, it is apparent the investing world is not aware of the timing of dividend boosts in the REIT world.
I maintain a database of about 130 REITs and include which month each usually announces its dividend hikes. Summer is one season with the fewest number of increase announcements. However, it can also be an opportunity because the market is not looking for higher dividend rate announcements.
There are three REITs that should announce higher payouts in the next several weeks. You can pick up shares now, and when a new higher dividend is announced you get the double bonus of a possible share price increase on the news and the guaranteed benefit of a higher yield than the current quoted rate.
Here are three stocks to consider buying in June for a July dividend increase.
National Retail Properties, Inc. (NNN) is a traditional triple-net lease REIT. The company owns almost 3,000 (up by 180 in the last year) free-standing, single tenant retail properties.
Most of the REIT’s tenants are in business that cannot be hurt or replaced by online sellers. The top types of businesses are convenience stores, casual and fast food restaurants, auto service shops, fitness outlets, movie theaters and auto parts stores.
When acquiring new properties NNN focuses on buying stores with great locations over high quality tenants. The good locations mean that the tenants will be successful and be able to pay the rents. Also, if a tenant does leave, it will be easier to re-lease a property in a great location.
NNN is a Dividend Aristocrat and has increased its dividend for 29 consecutive years. The current dividend is 71% of FFO. NNN will announce its next dividend boost in mid-July with record date at the end of the month and payment in mid-August.
Dividend growth has been about 4% per year and the current yield is 3.8%.
MGM Growth Properties (MGP) is a specialty REIT that owns gaming resort properties leased exclusively to MGM Resorts International (MGM). All the MGM Growth Properties owned properties are leased to MGM under a single master lease. This means that the gaming company cannot try to get out of leases on individual properties.
Both companies, MGP and MGM have been actively acquiring new gaming properties and resorts. When MGP acquires a property, it signs a management agreement with MGM. When MGM acquires or develops a property it sells the real estate to MGP and retains the management.
Cash flow growth at MGP has been excellent and the REIT has increased its dividend each quarter for four consecutive quarters. I expect another increase with the June dividend announcement.
The next dividend will be announced in mid-June with an end of the month record date and payment in mid-July. While this is in June instead of July as the title suggests, I feel it’s such a high quality stock it needs to be presented to you for consideration.
MGP yields 5.7%.
Simon Property Group (SPG) is the largest publicly traded REIT with a $58 billion market cap. The company owns 209 premium, class A shopping centers and outlet type shopping malls. The company has been a leader in helping retailers develop a mix of high-end brick-and-mortar retail stores with ecommerce sales and marketing.
The SPG dividend has grown for 12 straight years, with a five-year average growth rate of 12.5%. In recent years, the Simon board of directors has announced a dividend increase every other quarter.
The current $2.05 per share dividend has been paid twice, so I expect another dividend increase with the July dividend announcement. The next dividend will come with the second quarter earnings release in late July.
The record date will be mid-August with payment at the end of the month. SPG yields 4.9%.Buy the #1 stock to turn $25k into tens of thousands of dollars for life
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