ADC

If I Could Only Buy 1 Stock Right Now, This Would Be It

The answer to this question -- what's the one stock I'd buy right now if I could buy but one -- is highly individual and also quite broad.

After all, there are thousands of publicly traded stocks, and every investor's reasons for creating a new position in a stock or adding to existing shares varies as widely as our priorities and perspectives.

I'm a retiree with a penchant for equities that can provide predictable income to bolster the Social Security I'm now drawing while dampening the risk that can come with chasing growth through my shortened buy-and-hold window.

And at this point, I'd choose Agree Realty (NYSE: ADC). This Detroit-based real estate investment trust (REIT) has a singular focus on buying and developing properties across the United States and leasing them to leading retailers who themselves tend to be in recession- and e-commerce-resistant businesses that enable them to keep the rent rolling in.

ADC Total Return Level Chart

ADC Total Return Level data by YCharts

Three decades of market-beating performance

Agree Realty has executed this strategy commendably, providing a compound average annual return of 11.8% since it went public in 1994. That bests the overall market in total return as represented above by the SPDR S&P 500 ETF Trust (NYSEMKT: SPY), which itself launched in 1993.

Agree now boasts a steadily growing portfolio of 2,135 properties in 49 states, but as a REIT, Agree can't retain a whole lot of cash because it must pay out at least 90% of its taxable income as dividends. It has to finance its growth.

The trust's strong credit rating makes borrowing more affordable than for many of its competitors as it fills its space with investment-grade, rock-solid tenants such as Walmart, Tractor Supply, and Kroger. By sector, grocery stores now account for 9.7% of its tenants, followed by home improvement at 8.6%, tire and auto services at 8.5%, and convenience stores at 8.4%.

About 70% of this REIT's rent comes from investment-grade tenants, and its rock-solid balance sheet is enabling it to continue growing, including adding 319 properties for about $1.2 billion in the year just passed. The trust's next earnings report, meanwhile, is due out in mid-February, and I'm looking forward to see its guidance for 2024.

An agreeable performance as a dividend stock

Agree has performed agreeably as a real estate dividend stock, now yielding about 5% after raising its payout in small increments six times since switching from paying quarterly to monthly in January 2021. And over the past 10 years, this REIT has grown its dividend by an average of 6.1% per annum. A payout ratio of about 70% points to how comfortably the dividend is covered.

Another encouraging sign is that corporate insiders have been buying up shares. Four have duly reported to the SEC their purchases in the past four months and none have sold.

That includes president and CEO Joey Agree, who recently bought 1,300 shares and now owns about 556,000 of them, worth about about $33.4 million. And his father, current executive chairman Richard Agree, just bought 10,500 shares, giving him control of about 616,000 shares worth about $37 million in the company he founded in 1973.

I'm a believer, too, that this highly focused retail REIT merits a growing spot in my own retirement income strategy. I plan to hang on to what I have and add to it when the timing seems right.

Should you invest $1,000 in Agree Realty right now?

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Marc Rapport has positions in Agree Realty. The Motley Fool has positions in and recommends Walmart. The Motley Fool recommends Kroger and Tractor Supply. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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