Gladstone Commercial Corporation: REIT With A 6.9% Dividend Yield, But Tread Carefully

Real Estate Investment Trusts have a lot to offer investors who desire higher levels of investment income, such as retirees.

For instance, Gladstone Commercial Corporation (GOOD) is a REIT with a current dividend yield of 6.9%.

It is one of 416 stocks with a 5%+ dividend yield.

GOOD appears to be an attractive dividend stock, especially considering the available alternatives. The S&P 500 Index, on average, has a 2% dividend yield.

Plus, GOOD is one of only 29 stocks that pays its dividend each month.

However, GOOD’s dividend is far from guaranteed–its payout ratio is nearly 100%.

This article will discuss GOOD’s business model and financial performance, and why its dividend may be riskier than meets the eye.

Business Overview

GOOD invests primarily in single-tenant, and anchored multi-tenant net leased assets. It owns roughly 11 million square feet of predominantly office and industrial real estate in the U.S.

GOOD has a diversified portfolio. As of March 31st, 2017, GOOD’s portfolio consisted of 95 properties, leased to 88 different tenants across 19 industry groups.

(Click on image to enlarge)

GOOD Portfolio

Source: May 2017 REIT Week Presentation, page 13

The company’s portfolio is typically geared toward long-term agreements. GOOD’s average remaining lease term is 7.6 years.

In addition, GOOD enjoys high occupancy of 97.9% currently. Occupancy has never fallen below 96% since the company’s inception.

One thing for investors to keep in mind is whether the company is successful in lease renewals going forward. While only 0.5% of GOOD’s rents are set to expire this year, lease expirations increased to 1.3% in 2018.

Approximately 62% of GOOD’s tenants are rated investment grade or are the non-rated investment grade equivalent.

In all, there are four stocks investors can buy to gain exposure to Gladstone:

  • Gladstone Investment Corp. (GAIN), which invests in 75% debt and 25% equity securities.
  • Gladstone Capital Corp. (GLAD), which invests in 90% debt and 10% equity securities.
  • Gladstone Commercial Corp.
  • Gladstone Land Corp. (LAND), a REIT that invests in U.S. farmland.
1 2 3 4
View single page >> |

Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

However, the publishers of Sure ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.