A few days ago, I wrote about two Net Lease REITs that are seemingly trading at or below sound value: Lexington Realty (NYSE:LXP) and STAG Industrial (NYSE:STAG). I own both stocks, and I consider the durability of both REITs solid, based upon their past and future dividend growth prospects.
Dividend growth is something that I’m extremely interested in, especially in those REITs that can demonstrate that they can consistently generate steady and growing dividend income, while not sacrificing tenant or credit quality.
In today’s rising interest rate environment, it’s especially important to seek out investments that can not only generate robust dividend growth, but also maintain stable operating traits. The last thing we all need is another sucker yield REIT (like American Realty Capital Properties (NASDAQ:ARCP)).
One REIT that seems to get lost in the crowd is Monmouth Real Estate (NYSE:MNR). I have previously written on the company, and have come close to buying a few shares; however, I have never been able to pull the trigger YET. Today, I’m going to take another look to see if it may be time to jump onboard.
Let’s Start With The Differentiators
At the end of the latest quarter, Monmouth’s capital structure consisted of approximately $412 million in debt, of which $347 million was property-level fixed-rate mortgage debt, and $65 million were in loans payable. The company also has $111 million in perpetual preferred equity at quarter-end. Combined with an equity market capitalization of $655 million, Monmouth’s total market capitalization was approximately $1.2 billion at quarter-end.
Monmouth is unique compared with other peers, based upon the composition of its portfolio – FedEX (NYSE:FDX) and its subsidiaries represent 51.1% of Monmouth’s Annual Rent paid.
In addition, FDX and its subsidiaries represent 41.2% Monmouth’s Square Footage:
Also, when you compare Monmouth’s portfolio with the leading peers, you can see that the overall credit composition of its portfolio is the highest in the sector – around 79% of Monmouth’s rental income is from investment-grade tenants or subsidiaries. The rental roster includes Anheuser-Busch Inbev (NYSE:BUD), Bunzl (OTCPK:BZLFY), Caterpillar (NYSE:CAT), Coca-Cola (NYSE:KO), Dr Pepper Snapple Group (NYSE:DPS), FedEx (FDX), International Paper (NYSE:IP), Jim Beam Brands, Keebler/Kellogg’s (NYSE:K), National Oilwell (NYSE:NOV), ConAgra (NYSE:CAG), Sherwin Williams (NYSE:SHW), Siemens (OTCPK:SIEGY), Ulta (NASDAQ:ULTA), United Technologies (NYSE:UTX) and other high-quality companies.
