Net Lease REITs: Agree vs Realty Income Growth Analysis

Investors eyeing net lease REITs face a crucial decision. With Agree Realty's notable 3.6% FFO growth guidance and Realty Income's 2.1%, which REIT will better serve their dividend and growth needs? The divergence in yields also plays a vital role.

Date: 31-05-2025

AI Rating: 7

The report highlights the ongoing competitive landscape between two net lease REITs, Agree Realty and Realty Income. Yield is a key factor for investors, with Agree Realty offering a 4.1% yield and Realty Income presenting a more attractive 5.8% yield. While many investors might prioritize yield, growth metrics such as adjusted funds from operations (FFO) become critical in assessing longer-term prospects.

Earnings Growth and FFO: Agree Realty's projected adjusted FFO growth of 3.6% stands out positively against Realty Income's lower anticipated growth of 2.1%. This suggests that investors leaning toward rapid growth and potential dividend increases may find Agree Realty offers a more attractive proposition, especially since it has recorded a 5.5% annual dividend increase over the past decade compared to Realty Income’s 4.3%.

Yield Versus Growth: While Realty Income's higher yield is appealing, the trade-off comes in terms of lower growth. Investors focused solely on yield may overlook the potential for greater total returns from Agree Realty through its quicker growth trajectory. Ideally, a balanced approach considering both yield and growth may help investors optimize their portfolios.

Portfolio Diversification: Realty Income boasts a far more diversified portfolio with over 15,600 properties, compared to Agree Realty’s 2,400. This diversification could mitigate risk and provide stability, which may also appeal to risk-averse investors.

Conclusion: In the short term, each REIT offers distinct advantages: Realty Income for its immediate yield and stability, and Agree Realty for a potentially more robust growth strategy. Given these differentiators, investors should assess their priorities between immediate income generation and longer-term capital growth.

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