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

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