Dividend stocks have historically outperformed broad market indices Dow Jones Industrial Average, Meanwhile, the best returns come from stocks that consistently increase their dividends.
dividend machines like that’s certainly been the case Sehmat Realty (adc 1.23%), prologis (PLD 0.04%), and extra storage space (EXR -2.37%). That’s why these dividend stocks can continue their winning ways.
Agreed Realty stands as a provider of reliable total returns
mark rapert (Agree with Realty): Agreeable Realty has turned itself into a Wall Street darling in what might be considered a somewhat pedestrian business: leasing space to retail businesses.
Since going public in 1994, this real estate investment trust (REIT) has produced an average annual return of 12.5% and its dividend has grown an average of 6.1% per year over the past 10 years.
And that makes Sehmat an authentic Dow beater. Check out how this retail REIT’s total returns compare with the Dow Jones Industrial Average over the past decade:
And that Wall Street darling bit? Agree earns that description by impressing enough investors to keep its share price up nearly 17% year to date when many of its competitors are making zero profits.
Agree’s tenants are primarily investment-grade, name-brand retailers with a portfolio of over 1,800 properties and growing. The company will spend $1.59 billion on new acquisitions in 2022 and add net-lease assets in 2023 to have about $1.5 billion of liquidity.
All that and a penchant for punching the payouts means chances look good for Agree — which currently yields about 3.9% and pays monthly — to keep beating the Dow and almost any other relevant index. You can choose to use the benchmark.
Prologis is benefiting from a change in corporate sentiment regarding inventory management
Brent Nitre (Prologis): Prologis is a leader in logistics real estate. Over the past three years, the stock has outperformed the Dow Jones Industrial Average by about 25%. Prologis operates these massive warehouse facilities with dozens of truck bays that you often see when driving down a major highway near a major city.
One of the big stories coming out of the COVID-19 pandemic has been a corporate rethink of inventory management. Before the pandemic, corporate America operated by the philosophy that inventory had a cost to manage and that an expanded supply chain was more efficient. This is indeed true, although that philosophy comes with a price and it was exposed during the pandemic. Many companies were caught short due to insufficient inventory on hand and were forced to curtail business.
The COVID-19 pandemic prompted companies to build up inventory and this translated into lower vacancy rates and larger increases in rents when leases reset or expired. At the end of 2022, occupancy was 98.2%, up significantly from the pre-pandemic level of 96.5%. This higher level of occupancy is translating into larger rent increases when leases expire. Prologis has the best portfolio of logistics locations based on proximity to major US cities and major highways.
Last year, there was some concern about FedEx, And Amazon reducing their warehouse space. No impact seen on the company so far: Amazon is exiting some non-Prologis spaces and FedEx is looking at air freight, which won’t affect Prologis. Looking at the fundamentals, Prologis should see strong growth for the foreseeable future.
extra special return
matt diallo (Additional Storage Space): The self-storage sector benefits from the demand for sustainable and growing storage space. This keeps units full, helping the industry raise rents and increase capacity. These factors have driven strong continued earnings and dividend growth for self-storage REITs.
The best performing extra space in the last decade is storage. It has produced a 490% total return (19.4% annualized), which is more than double the Dow’s total return of nearly 200% (11.7% annualized) during that time frame. Xtra Space has also significantly outperformed the Dow over the past three and five years.
A big driver of the company’s strong total returns is its growing dividend. Xtra Space has delivered sector-leading dividend growth of 650% over the past decade. Per-share growth of nearly 700% over the last 10 years – Fueling the growing dividend is Xtra Space Storage’s best-in-class core funds from operations (FFO).
Xtra Space has benefited from several growth drivers, including rising rental rates, acquisitions and its third-party management platform. The company is a leader in third-party management with 886 locations out of its 2,337 store portfolio. The platform delivers capital-efficient growth, enabling the company to generate additional income streams from management fees, tenant insurance and loan interest for minimal investment. The platform also offers an acquisition pipeline, as it can acquire managed assets when owners are ready to sell.
Xtra Space should be able to continue growing its portfolio, FFO, and dividend at attractive rates in the future. The self-storage sector remains highly fragmented, providing additional space with multiple acquisition and management opportunities. In the meantime, it has a strong balance sheet to keep funding new investments.
John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, a subsidiary of Amazon. Brent Nutrey, CFA does not have any position in any of the stocks mentioned. Mark Rapaport holds positions in Agreeable Realty, Amazon.com, and Prologis. Matthew DiLallo holds positions at Amazon.com, FedEx, and Prologis. The Motley Fool has posts at Amazon.com, FedEx and Prologis and they recommend it. The Motley Fool recommends storing extra space. The Motley Fool has a disclosure policy.