Up to date on April 2nd, 2025 by Felix Martinez
Actual Property Funding Trusts have a lot to supply traders who need increased funding earnings, together with retirees. As an example, Gladstone Industrial Company (GOOD) is a REIT with a excessive dividend yield of seven.9%.
You may see the complete listing of 5%+ yielding shares by clicking right here.
Gladstone Industrial seems to be a pretty dividend inventory, particularly contemplating the out there options. The S&P 500 Index, on common, has a couple of ~1.3% dividend yield. Plus, Gladstone Industrial pays its dividends every month.
You may obtain our full Excel spreadsheet of all 76 month-to-month dividend shares (together with metrics that matter like dividend yield and payout ratio) by clicking on the hyperlink beneath:
Nevertheless, Gladstone Industrial’s dividend is way from assured. Its payout ratio is sort of 85%, leaving little room for error in sustaining the dividend.
This text will focus on the belief’s enterprise mannequin and monetary efficiency and clarify why its dividend could also be riskier than it first seems.
Enterprise Overview
Gladstone Industrial is a Actual Property Funding Belief, or REIT, that invests primarily in single-tenant and anchored multi-tenant internet leased property. It owns 16.2 million sq. ft of workplace and industrial actual property within the U.S.
Gladstone Industrial has a really diversified portfolio. As of the top of December 2022, the belief’s portfolio consisted of 135 properties in 27 states, leased to over 106 totally different tenants in 19 industries.
Supply: Investor presentation
The belief’s portfolio is usually geared towards long-term agreements. As well as, Gladstone Industrial enjoys excessive occupancy charges, together with a present charge of 98.5%. Impressively, occupancy has by no means fallen beneath 95% for the reason that belief’s IPO in 2003.
Roughly 53% of Gladstone Industrial’s tenants are rated funding grade or are the non-rated funding grade equal. This contributes to a high-quality portfolio of tenants that ought to climate minor financial downturns and protect Gladstone Industrial’s hire streams.
Gladstone Industrial Company reported its fourth-quarter and full-year 2024 monetary outcomes. The entire working income for This fall 2024 was $37.4 million, down 4.7% from Q3. Web earnings declined by 38.6% to $7.2 million on account of decreased property gross sales positive aspects and better impairment prices. Funds from operations (FFO) out there to frequent shareholders have been $15.3 million ($0.35 per share), a 5.6% drop from Q3. Core FFO fell 5.9% to $15.3 million ($0.35 per share), impacted by the absence of a previous quarter’s settlement acquire.
For the complete 12 months, complete working income elevated 1.2% to $149.4 million, whereas internet earnings surged to $24.0 million from $4.9 million in 2023 on account of lowered impairment prices. FFO reached $59.7 million ($1.41 per share), a slight 0.8% improve, whereas Core FFO rose 0.5% to $60.2 million ($1.42 per share). The corporate maintained a 100% hire assortment charge and paid $1.20 per share in frequent dividends.
Key transactions included buying seven absolutely occupied properties for $26.8 million, promoting seven non-core properties for $39.0 million, and issuing $75.0 million in senior unsecured notes at a 6.47% fastened rate of interest. Gladstone additionally leased 1.8 million sq. ft of vacant house and renewed 1.1 million sq. ft, supporting long-term occupancy and money move stability.
Progress Prospects
The belief has generated spectacular income progress up to now, however bottom-line progress has leveled off these days. This creates some uncertainty concerning the distribution’s security. FY2025 core FFO expectations are flat.
Gladstone’s FFO-per-share has been between $1.40 and $1.60 for many of the previous decade because the belief continues to subject new shares and debt to fund acquisitions. Nonetheless, these acquisitions fail to supply an financial acquire for shareholders after accounting for share issuance and value of debt. In different phrases, whereas the belief’s new properties present progress on a greenback foundation, when the price of these acquisitions is factored in, it’s primarily no acquire on a per-share foundation.
Given the place the distribution is right now, that would current an issue because the belief’s payout ratio is approaching 100%. Nevertheless, regardless of the favorable fundamentals of the belief’s portfolio, its headwinds to earnings progress (dilution and working bills) are nonetheless very a lot current.
Nonetheless, the corporate has efficiently grown its asset base at a double-digit annual compound progress charge within the final decade. And since 2003, the portfolio has maintained excessive occupancy exceeding 95%.
With restricted lease expirations in 2025, the corporate is targeted on progress. They’re eager about rising the portfolio’s industrial allocation. Presently, industrial properties account for roughly half of the portfolio. Workplace properties make up many of the the rest, with retail and medical places of work rounding it out.
Dividend Evaluation
Gladstone Industrial’s present month-to-month dividend cost is $0.10 per share. On an annualized foundation, the dividend cost is $1.20 per share, which is good for a excessive 7.9% dividend yield.
The distribution has been stagnant at $0.125 per share month-to-month since January 2008, reflecting the belief’s struggles with progress. Nevertheless, lately, the corporate determined to chop the dividend, decreasing the month-to-month cost to $0.10 per share in January 2023.
To its credit score, Gladstone Industrial has paid month-to-month dividends for greater than 16 consecutive years, a formidable monitor file of constant payouts.
Since Gladstone Industrial’s 2003 preliminary public providing, the belief has not missed a distribution or lowered it till lately, which continues to be fairly spectacular for a REIT given the big selection of financial situations which have existed on this timeframe.
One other essential consideration when shopping for dividend shares is steadiness sheet energy.
An excessive amount of debt can jeopardize a belief’s dividends. On a constructive notice, Gladstone Industrial has labored to cut back its leverage considerably over the previous a number of years and now has a balanced maturity schedule. Moreover, its lowered dividend payout degree will additional ease the burden on its steadiness sheet.
Supply: Investor Presentation
About 97% of Gladstone Industrial’s debt is both fixed-rate or hedged, which might assist mitigate the influence of risky rates of interest.
As well as, vital maturities are a number of years away, that means the belief has time to generate money to pay them off or discover higher methods to refinance them.
If the belief’s fundamentals deteriorate over the subsequent few years, there’s a likelihood it might not have the ability to maintain its dividend, even on the lowered present degree. We see this because the principal danger of proudly owning Gladstone Industrial right now.
Last Ideas
Gladstone Industrial’s very excessive dividend yield is enticing and seems to be sustainable, at the least within the close to time period, given the belief’s present degree of FFO. The belief additionally enjoys excessive occupancy and robust rental charges.
Consequently, traders might want to monitor the belief’s outcomes intently to make sure FFO doesn’t decline a lot from current ranges. Certainly, even a modest decline might jeopardize the dividend.
Gladstone’s yield is enticing to earnings traders, however there seems to be little in the way in which of earnings progress. The month-to-month cost schedule is a bonus with the excessive yield, however traders should take note of outcomes and monitor the payout ratio.
Don’t miss the sources beneath for extra month-to-month dividend inventory investing analysis.
And see the sources beneath for extra compelling funding concepts for dividend progress shares and/or high-yield funding securities.
Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to help@suredividend.com.
