Key Factors
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Sun Communities owns cellular house parks and RV resorts.
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Agree Realty owns single-tenant retail properties.
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Sun Communities usually will get the nod for its development potential, however Agree might have higher all-around prospects.
Actual property funding trusts (REITs) are usually revenue investments, however all of them go concerning the revenue theme a bit in a different way. For instance, Sun Communities(NYSE: SUI) is commonly considered as a growth-oriented REIT, whereas a REIT like Realty Revenue(NYSE: O) is all a couple of sustainable excessive yield. In the event you lean extra towards Sun Communities, you then may wish to look at Realty Revenue competitor Agree Realty(NYSE: ADC) as an alternative. Here is why.
What do these REITs do?
Sun Communities owns cellular house parks and RV resorts. It is without doubt one of the largest gamers in every of those niches. The expectation is that the rising variety of older individuals will result in strong, long-term development for the REIT’s belongings. That is more likely to be true since cellular house parks are a lower-cost dwelling choice than different varieties of housing. In the meantime, the RV life-style tends to draw loyal adherents. There isn’t any purpose to consider that the massive image development angle right here is not going to pan out as anticipated.
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Agree Realty is a bit much less thrilling. It owns single-tenant net-lease retail properties. A internet lease requires the tenant to pay for many property-level working bills. Retail belongings, in the meantime, are typically pretty generic, making them comparatively simple to purchase, promote, and discover new tenants if wanted. The massive story with Agree is about development by acquisitions. With a modest portfolio of about 2,400 properties, it has loads of room for development.
Which is the higher dividend inventory?
To start out with the obvious quantity, Agree Realty has a 4.2% dividend yield. Sun Communities’ yield is just below 3.4%. Clearly, from an revenue perspective, Agree Realty wins this level. To be honest, Sun Communities’ yield is close to its highest stage in 5 years, so some traders may see the inventory as attractively priced. But it surely nonetheless is not providing as a lot revenue as Agree, which additionally occurs to be buying and selling with a yield that can also be close to its excessive finish through the previous 5 years.
With regard to dividend consistency, Sun Communities has elevated its dividend yearly for 9 consecutive years. Agree Realty’s streak is a little more sophisticated. Roughly 5 years in the past it switched from quarterly to month-to-month funds, so it would appear to be there was a dividend reduce. The dividend has truly been elevated yearly since 2012, which is greater than 10 years. Agree wins once more.
Then there’s the query of dividend development. Sun Communities’ dividend has elevated at an annualized fee of roughly 4% through the previous decade. Agree’s dividend has grown at a roughly 5% tempo over that very same span. One other level for Agree. To be honest, Sun Communities’ dividend development has been barely quicker through the previous couple of years, however there is a caveat right here.
Seeking to the long run, the chance set within the net-lease retail property area of interest is far bigger than the chance set within the areas during which Sun Communities competes. Even from a easy stage, it’s simpler to construct retail properties than get a brand new cellular house park authorised in most areas. That will make Sun Communities’ properties extra helpful in some methods, however on condition that Agree’s development is basically pushed by acquisitions, it nonetheless wins the purpose.
Most dividend traders will most likely be higher off with Agree
Sun Communities is a superbly high-quality REIT, and it would not be a foul determination to purchase it. Nonetheless, in case you are on the lookout for dividend development, you is likely to be higher off with Agree Realty. It has a better yield, higher historical past of dividend development, and a enterprise mannequin that may most likely provide an extended runway for strong, long-term development. And, like Sun Communities, Agree Realty’s valuation, utilizing yield as a tough gauge, appears enticing proper now.
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Reuben Gregg Brewer has positions in Realty Revenue. The Motley Idiot has positions in and recommends Realty Revenue. The Motley Idiot recommends Sun Communities. The Motley Idiot has a disclosure policy.
