Realty Revenue and Vici Properties may be higher REIT performs for revenue buyers.
AGNC Funding (AGNC -0.39%) typically attracts a whole lot of dividend investor consideration due to its huge 14% yield. It is a mortgage actual property funding belief (mREIT) that originates its personal mortgages and invests in mortgage-backed securities (MBS). It books the curiosity from these mortgages as its web revenue, which it then shares with buyers by its huge dividends.
To hedge towards one other housing disaster, AGNC allocates 89.4% of its $73.3 billion portfolio to company MBS property, that are backed by Fannie Mae, Freddie Mac, or Ginnie Mae. However in 2024, AGNC’s web unfold and greenback roll revenue per share dropped 28% to $1.88 per share because the Fed’s three rate of interest cuts lowered its profitability.
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That also simply lined its $1.44 in dividends per share for the yr, which it paid out on a month-to-month foundation. However for 2025, analysts anticipate AGNC’s web unfold and greenback roll revenue to drop one other 15% to $1.60 per share as rates of interest maintain sliding. That raises some near-term considerations about its huge dividend, regardless that it seems sustainable for now.
As a substitute of chasing AGNC’s excessive yield, buyers would possibly wish to take into account shopping for these two different conventional REITs — Realty Revenue (O 0.92%) and Vici Properties (VICI 1.41%) — which purchase and lease out bodily properties as an alternative of counting on the mortgage market. Each of those shares ought to fare higher in a decrease rate of interest atmosphere than AGNC.
Realty Revenue
Realty Revenue is a retail REIT that owns roughly 15,600 actual property properties internationally. Its high tenants embody Greenback Common, Greenback Tree, Walgreens, and 7-Eleven.
As a retail REIT, it buys properties, rents them out, and splits that rental revenue with its buyers. A few of its tenants struggled with retailer closures over the previous few years, however its occupancy charge has by no means dropped beneath 96% since its IPO in 1994. That prime charge signifies its stronger tenants can persistently choose up the slack from its weaker tenants.
As a REIT, Realty should pay out no less than 90% of its pre-tax earnings as dividends to keep up a positive tax charge. Like AGNC, Realty pays its dividends month-to-month. It is raised its payout 130 occasions since its 1994 IPO, and it pays a hefty ahead yield of 5.7%.
Realty Revenue’s dividend yield might sound paltry in comparison with AGNC’s. However over the previous 10 years, it delivered a complete return of 70% (after together with its reinvested dividends) and beat AGNC’s whole return of 57%.
From 2014 to 2024, its adjusted funds from operations (AFFO) per share rose at a gentle CAGR of 5%. For 2025, it expects that determine to develop 1%-2% to $4.22-$4.28 per share, which ought to simply cowl its ahead annual dividend charge of $3.22 per share. At $56, Realty’s inventory nonetheless seems like a cut price at 13 occasions this yr’s AFFO per share.
Vici Properties
Vici is an experiential REIT that owns a portfolio of 93 on line casino and leisure properties within the U.S. and Canada. Its high tenants embody Caesar’s Leisure, MGM Resorts, Penn Leisure, and Century Casinos.
Vici has maintained an ideal occupancy charge of 100% ever since its IPO in 2018. It completed that by locking its tenants into multi-decade leases, with annual lease will increase largely pinned to the patron worth index (CPI) so its lease retains tempo with inflation.
From 2018 to 2024, Vici grew its AFFO per share at a gentle CAGR of 8%, and it is raised its dividend yearly since its public debut. For 2025, it expects its AFFO per share to develop 3%-4% to $2.32-$2.35 per share — which ought to simply cowl its ahead annual dividend charge of $1.73 per share. That equals a ahead dividend yield of 5.5%.
At $32, its inventory nonetheless seems like a cut price at 14 occasions this yr’s AFFO per share. Vici solely pays quarterly dividends, and its yield is far decrease than AGNC’s. However when you had invested in Vici’s IPO on Feb. 1, 2018, you would be sitting on a complete return of 124% at present. AGNC solely netted a complete return of 30% throughout that very same interval. Previous efficiency by no means ensures future positive aspects, however Vici’s simplicity, scale, and stickiness arguably make it a extra dependable revenue play than AGNC.
Leo Solar has positions in Realty Revenue and Vici Properties. The Motley Idiot has positions in and recommends Realty Revenue. The Motley Idiot recommends Vici Properties. The Motley Idiot has a disclosure coverage.
