Secure $7,000 a Year in Passive Income By Investing $150,000 in These Real Estate Deals

Key Points

• Recent data out of the real estate sector has been mixed, but some real estate dividend stocks are still worth investing in.

• They are trading at cheap levels and pay competitive yields with solid safety margins.

• These real estate dividend stocks could surge if bond yields keep dropping. In the meantime, you can sit back and collect the dividends.

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Data out of the real estate sector has been stronger than expected in the past few years. Many had expected higher interest rates to lead to a collapse in prices and a bust like the one during the Great Recession. However, investors have learned from their past mistakes, and the market has generally held up this time around. When banks and certain institutions did go down during the mini-banking crisis in 2023, they were quickly bailed out.

No one knows for sure if they will be bailed out again during the Trump administration, but the footing remains strong. They’re worth considering for any dividend portfolio due to the pessimism keeping stock prices low. Once the economy normalizes, you could see them deliver both upside and dividends that grow faster than usual.

That said, recent data out of the sector has been somewhat soft. S&P CoreLogic Case-Shiller showed a slightly lower increase, and the house price index month-over-month also came in at 0.2% vs. the 0.3% forecast. Monthly new residential sales data came out, which grew 1.8% from the revised January rate of 664,000 to 676,000. Forecasts were at 682,000. With that in mind, it’s a good idea to focus on safer real estate stocks for now, but you wouldn’t have to sacrifice much on the yield.

If you split $150,000 equally into each of these stocks, the dividends work out to about $7,000 in passive annual income.

Agree Realty (ADC)

Agree Realty (NYSE:ADC) is a net-lease REIT. A net lease retail property is an agreement where the tenant not only pays rent but also covers some or all of the property’s expenses. 68.2% of the company’s annualized base rents come from investment-grade retail tenants. Agree Realty is more geared towards companies like Walmart (NYSE:WMT) and Home Depot (NYSE:HD).

By no means are retail companies completely safe from a recession, but they are likely to remain profitable and pay enough rent for Agree Realty to maintain its dividend. ADC stock itself has been flat since pre-COVID prices and has had a lot of volatility, but dividends have continued climbing. The dividend payments are covered quite well and are 74% of Core FFO per share and 73% of AFFO per share.

The 3-year dividend growth rate is at 4.8%, which is better than 64.5% in the REITs industry. The forward dividend yield of 4.03% is worse than the median of 7%, but I believe ADC is worth buying due to its safety profile. It still has a 99.6% occupancy rate and no major debt until 2028.

VICI Properties (VICI)

VICI Properties (NYSE:VICI) is a REIT that specializes in casino and other entertainment properties. That might not look like the best safety profile as leisure spending goes down during downturns, but I believe that’s exactly why this stock remains underpriced.

The company has very high-quality tenants with an average lease term of 41 years and 100% rent collection, even during the 2020 downturn, where most people didn’t even plan a travel itinerary, let alone visit casinos or entertainment facilities. If Vici Properties can perform well in such an environment, I’m confident it can do so in any future recession.

The company’s free cash flow margin is at 61.7% and is better than 71.7% of the REITs industry. The dividend payout ratio is also at 0.66, which is better than 79.1% of the REITs industry and is at nearly the lowest level historically. Dividends have also grown at 7.1% and now yield 5.46%.

The dividends here look very safe, and so does the rest of the company. The financials haven’t been growing much, so you’re unlikely to see the stock price increase unless bond yields come down substantially. But that shouldn’t be a big factor if you just want passive income.

Federal Realty Investment Trust (FRT)

Federal Realty Investment Trust (NYSE:FRT) mostly invests in shopping centers in the U.S. Unlike the other companies on this list, that has made it more vulnerable during downturns. In fact, FRT is trading at a 41% discount from its highs around nine years ago. The stock is still 25% off its pre-COVID prices.

That price discount is largely why I’m bullish. Most of the bearishness surrounding the company has been priced in at the current range. The stock seems undervalued at current levels since it pays a pretty solid dividend, and its management sees growth going forward.

The company also has high occupancy and is also a Dividend King. It has been increasing its dividends consecutively for 58 years. Both revenue and FFO are expected to grow steadily at 5-6% annually on average through 2030, and given the company hasn’t budged on dividend payouts in any of the recessions in nearly the past six decades, I don’t think it will do so in a future recession.

The dividend yield here is 4.48%.