Real estate income or agree with real estate: which stocks with monthly dividends are best to buy for passive income right now?

Real estate income (ABOUT 0.10%) And I agree Real Estate (ADC -0.87%) are two of the largest real estate investment trusts (REITs) specializing in freestanding, net-lease retail properties. These leases require tenants to cover all operating costs (including ongoing building maintenance, property taxes, and property insurance). This allows REITs to generate very stable rental income, allowing them to pay monthly dividends.

Given the similar strategies, most investors will likely only want to own one of them. REIT. Look which one of these monthly dividend shares best buy for passive income right now.

Look at the numbers

It’s important to take a closer look at the key financial metrics of these REITs to see how they compare. Here’s a snapshot of those numbers:

Data source: Realty Income and Agree Realty.

From these figures we can see that the income from real estate is much higher. dividend yieldWhat solely due to its much lower grade because they both have similarities dividend payout ratios. At first glance, the only explanation for the difference in valuations is that Agree Realty has a much lower valuation. leverage ratiogiven that REITs are increasing their adjusted funds from operations (AFFO) this year at about the same pace. What seems to imply that Agree Realty is a financially stronger company.

However, a closer look at their balance sheets reveals that things are much more complicated than they appear at first glance. Agree Realty’s leverage ratio is 4.9x after excluding outstanding forward shares (shares the company has agreed to sell to finance future investments). Meanwhile, the REIT’s credit rating is BBB+/Baa1, a notch below Realty Income’s A-/A3 credit rating (one of eight REITs on the REIT Rating). S&P 500 Index index with a credit rating of the same or higher level). So, clearly, Realty Income is a very financially strong REIT.

Take a look at their portfolio

Realty Income and Agree Realty have similar real estate portfolios as they focus on owning individual net-leased retail properties. However, there are some key differences between their portfolios.

Realty Income owns 15,457 properties in the United States and Europe, leased to 1,552 clients in 90 industries. It is the seventh largest REIT in the world with $58 billion in real estate. Retail real estate makes up 79.4% of the portfolio. Realty Income also owns industrial real estate (14.6%), gaming real estate (3.2%) and other real estate (including data centers). About 32% of rent comes from investment-grade tenants.

Agree, Realty has a much smaller portfolio. The REIT owns 2,271 retail properties throughout the United States. draw up REIT also has the majority of its portfolio 223 land lease this provides about 10.9% of the annual base rent. Ground leases are even more stable than net leases and provide income similar to bonds. The company receives 67.5% of its rent from investment-grade tenants.

From this information, we can conclude that Realty Income offers investors a much more diversified portfolio (geographically and by property type). However, Agree Realty has a lower-risk portfolio given its focus on investment-grade tenants and ground leases.

The best REIT to buy right now

Both REITs are excellent options for those looking for monthly income. passive dividend income streamRealty Income is the best buy right now. It trades at a much lower price (and higher dividend yield) while growing just as fast as Agree Realty and has the same strong financial profile.

While Agree Realty has some low-risk characteristics, Realty Income also has a low-risk profile and offers investors greater diversification and scale. Realty Income gives investors higher overall return potential through higher yields and a lower relative valuation, making it a better buy. right now.

Matt DiLallo holds positions at Realty Income. The Motley Fool has positions and recommends Realty Income. The Motley Fool has a disclosure policy.