Three Low-Risk Dividend Shares to Acquire for Steady Passive Earnings into 2025 and Beyond
Different types of dividend stocks exist, each with varying risk profiles and yield rates. Some companies offer higher yields along with higher risk levels, while others deliver lower yields but provide more growth potential. Others fell into the category of offering a balanced mix, providing robust income streams with a more measured rise.
Agree Realty (ADC down 0.72%), Sun Communities (SUI down 0.88%), and Stag Industrial (STAG down 1.17%) belong to the latter group. These are real estate investment trusts (REITs) that offer above-average dividends with lower risk profiles, making them an attractive choice for investors seeking durable passive income streams. Here's why income-focused investors should consider buying them for the future, up to 2025 and beyond.
Dedicated to stability
Agree Realty focuses on retail real estate, owning freestanding properties that are either leasehold or ground-leased to financially sound tenants (67.5% of its rental income comes from investment-grade tenants). The lease structures necessitate that tenants cover all expenses, including routine maintenance, property taxes, and insurance, providing the REIT with a highly stable and low-risk income stream.
Agree Realty pays a conservative percentage of its steady income as dividends (its payout ratio is less than 75% of its funds from operations, or FFO). Its strong investment-grade balance sheet, backed by a low leverage ratio, further solidifies its 4%-yielding monthly dividend's sustainability.
Agree Realty has increased its dividend by a 5.7% compound annual growth rate over the past decade and is poised for further growth in 2025 and beyond. The company currently has a record $2.3 billion in liquidity and no significant debt maturities until 2028, granting it ample financial flexibility to acquire income-generating retail properties in the coming years.
As steady as can be
Sun Communities specializes in residential real estate, with a concentration on niche property sectors such as manufactured home communities, RV resorts, marinas, and U.K. holiday parks.
Manufactured home communities are exceptionally durable rental properties. Relocating a manufactured home is challenging and costly, making it difficult for tenants to move out during economic downturns. This allows the REIT to continue raising rents even during a recession. Over the past 20 years, Sun Communities has recorded positive growth in its net operating income (NOI) every year.
Sun Communities is well-positioned to continue growing in the coming years. It anticipates raising rents at its manufactured homes communities at rates linked to market or inflation and leveraging its numerous recently developed or vacant sites across its portfolio to increase its already strong occupancy rate.
Meanwhile, the company is transitioning RV sites from transient to annual leases, generating higher, steadier income. Alongside its internal growth drivers, Sun Communities has a solid investment-grade balance sheet, offering it financial flexibility to make new acquisitions when opportunities arise. These factors should continue to boost its FFO, enabling the REIT to increase its more than 3%-yielding dividend.
Highly desirable properties
Stag Industrial focuses on industrial real estate, such as warehouses and light manufacturing facilities. Its leases are long-term with credit-worthy tenants, and the rents escalate at a low-single-digit annual rate (2.8% for 2024).
The company's leases yield substantial, stable cash flow. It returns less than 70% of its income via its monthly dividend (a yield of over 4%), allowing it to generate over $100 million in excess free cash flow annually. Stag Industrial also has a strong investment-grade balance sheet, giving it even more financial flexibility to invest in new properties.
Demand for industrial real estate is robust and growing, enabling Stag Industrial to secure significantly higher lease rates when legacy contracts expire (an average of 30% in 2024). Combining the rent growth from legacy leases with incremental income from new investments, Stag Industrial can continue expanding its dividend, having done so every year since its IPO in 2011.
Low-risk, high-yield dividend stocks
Agree Realty, Sun Communities, and Stag Industrial have distinctive, low-risk business models. Their properties are backed by long-term leases providing stable income streams. They also possess impressive financial profiles. This makes them highly likely to maintain and grow their high-yielding dividends in 2025 and beyond, making them attractive dividend stocks for investors seeking durable passive income.
Investors seeking low-risk alternatives for generating passive income might find these stocks appealing. Agree Realty, Sun Communities, and Stag Industrial, with their robust business models and impressive financial profiles, are well-positioned to maintain and potentially increase their high dividend yields beyond 2025.
Agree Realty's investment-grade balance sheet, coupled with its highly stable income stream from retail properties and conservative payout ratio, contributes to its likelihood of sustained dividend growth.
These companies' focus on low-risk business models, backed by long-term leases and creditworthy tenants, makes them compelling choices for investors seeking secure income streams and capital appreciation opportunities.
