As the likelihood of a recession rises, along with it comes a precipitous drop in bond rates and a steep fall in stock prices. Thus, investors may be eager to liquidate their stock holdings and seek safety in cash or short-term bank certificates of deposit.
For investors looking to put their money to work, a possibly better option than a Bank CD could be a Real estate investment trust (REITs). More particularly, Store Capital (NYSE: STOR), a company with a bond-like dividend that has been stress tested during the Covid pandemic and has emerged possibly stronger.
Notably, $10,000 invested in the company when it went public in November 2014 would have turned that investment into $13,778, which for some might not be something to write home about. However, the dividends paid out in the past six years per share amount to $7.55 or roughly 4.6% annual return on investment.
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How safe is STOR stock?
STOR is growing at an increased rate as adjusted funds from operations have been rising 12% year-on-year (YoY) in 2021, and predictions for 2022 are for a 7.3% growth YoY.
Meanwhile, the company’s free cash flow is reinvested and boasts one of the highest growth rates among REITs, well over 5%. Dividends were also growing at an annual clip of 6.1%, with expectations that this could continue.
The bottom line
It seems as if STORE has been an outstanding investment for the past several years. Yielding over 5%, raising the dividend by around 6% annually, and paying out cash to shareholders are just some of the benefits.
At the current price of $27.35, a $10,000 investment would buy roughly 365 shares, bringing in $140 each quarter or a total of $562 annually. With the magic of compound investing over a 5-year period and a conservative estimate that the price would appreciate 4% annually, the initial investment would get you to 488 shares.
Along with the shares, the initial value would be worth $16,238.91 with $3,813.39 dividends paid out, equating to a 10.22% annualized return with dividend reinvestment.
Like all investments, investing in STORE brings with it risks; however, numerous analysts consider real estate a proven hedge against inflation, and what better way to diversify a real estate portfolio than through a high-quality REIT.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.