In the pursuit of stocks offering both appreciation and a substantial dividend yield, investors often face the challenge of finding a balance. Many high-yielding stocks, unfortunately, have seen declines in share prices as the primary reason for their attractive dividend rates.
However, a unique stock defies this trend, presenting not only a high-yielding dividend but also a remarkable performance surpassing its peers over the past 52 weeks. Enter Modiv Industrial Inc. (NYSE: MDV), a Reno-based, internally managed diversified Real Estate Investment Trust (REIT) that has not only outperformed the competition but also maintains an impressive monthly dividend.
Modiv Industrial, founded in 2015 and having undergone its initial public offering (IPO) in February 2022, stands as a relatively unknown micro-cap stock with a market cap of $113.7 million. Despite its low profile, the company has demonstrated exceptional growth, with a 52-week range of $10.01 to $19.12. The REIT has strategically acquired over $214 million in industrial manufacturing assets since its IPO, offsetting this growth by divesting 10 office buildings and several retail properties.
In August, Modiv made headlines with the sale of 11 retail and two office properties to Generation Income Properties Inc. (NYSE: GIPR) for a sum of $30 million in cash and $12 million in Generation Income’s preferred stock, featuring monthly dividends at a 9.5% annual rate.
The company’s third-quarter operating results, reported on Nov. 13, showcased an adjusted funds from operations (AFFO) of $0.33, aligning with estimates and marking a 6.4% increase from the third quarter of 2022. Revenue exceeded estimates at $12.5 million, representing a substantial 21% growth compared to the same quarter in the previous year.
An encouraging aspect of the report was Modiv’s reduction in leverage by $10 million, accompanied by a 14% decrease in net debt to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from the previous quarter. Notably, the entirety of Modiv’s $285 million debt is now held in fixed-rate loans with a weighted average interest rate of 4.52%, with the earliest meaningful maturity starting in 2027. The company also announced a shift toward using cash for future acquisitions instead of relying on high-interest debt.
Modiv’s monthly dividend of $0.0958 per share, payable on Dec. 26 to shareholders as of Nov. 30, offers an annual yield of 7.67%. While the forward annual payout ratio of 87.7% is relatively high, it remains within manageable limits.
Recent months have seen notable insider purchases of Modiv’s stock, with CEO Aaron Scott Halfacre demonstrating confidence in the company through his acquisition of 203.42 shares at $14.54 each on Oct. 25. Three other insiders also purchased shares in September and October.
B. Riley Securities, on Nov. 15, maintained a Buy rating on Modiv, raising the price target from $17 to $18 per share. With a recent closing price of $14.98, this adjustment implies a potential gain of 20.1%.
Modiv’s outstanding total return of 53.49% over the past 52 weeks positions it as the top-performing REIT in that timeframe, and it also claimed the top spot in performance during September. While future performance may not replicate this exceptional run, Modiv Industrial stands out as a REIT expected to continue performing well, offering investors a high-yielding monthly dividend.
