Agree Realty: A Rock Solid Option For Income And Safety

Core Viewpoint - Agree Realty Corporation (ADC) is considered one of the highest quality and safest REITs, offering a reliable dividend yield of 4.3% and locked-in rent growth of approximately 2% per year, with potential upside as interest rates decline [3][5][18] Company Overview - ADC has a market capitalization of $6.8 billion and a share price of $67.33, with a property count of 2,202 [10] - The company maintains a net debt to EBITDA ratio of 4.9x, indicating a strong balance sheet [10] Business Model and Tenant Quality - ADC focuses on larger properties leased to high-quality tenants, with nearly 70% of rent coming from investment-grade tenants, minimizing collection risk [7] - Approximately 11% of ADC's revenue comes from ground leases, which are generally safer than traditional leases, further reducing tenant default risk [7][9] Revenue Predictability - ADC boasts a near full occupancy rate of 99.7%, with less than 10% of leases expiring over the next three years, contributing to predictable rent revenue [9] Growth and Valuation - Consensus estimates project FFO per share growth of around 4% per year until 2026, driven by rent escalators and new acquisitions [11] - The stock currently trades at 17x FFO, below its 10-year average of 18.5x, with an FFO yield of 5.8%, which is 150 basis points above long-term treasury yields [14] Interest Rate Sensitivity - ADC is expected to be sensitive to interest rate changes, with a potential price target of $77 per share if long-term yields decline to 3.75%, indicating a 13% upside potential [16]