NEW YORK (TheStreet) -- One of the best dividend-paying companies today is anchored in Monmouth County, N.J.
Monmouth Real Estate Investment Corp.
is a 45-year battleship of a REIT whose business model is investing in single-tenant industrial properties secured by long-term net-leases to investment grade tenants.
Accordingly, this stalwart ship provides investors with a total return vehicle that performs well throughout the business cycle. As one of the oldest REITs, Monmouth is a multi-cycle tested company and its consistent performance speaks for itself.
Real estate ownership provides an attractive hedge against inflation, and that is perhaps the most important aspect investors should consider given the current environment. Monmouth has a market capitalization of around $450 million with a current dividend yield of 5.4%. The stock price is $11.11 per share and the company's year-to-date total return is 26.80% (source: SNL Financial).
Recently I was able to catch up with the admiral of the battleship brand: Eugene W. Landy, founder, chairman, president and CEO. In this exclusive interview for
, I was able to gain insight into Monmouth's extraordinary track record of sustainable dividend performance (Monmouth has never cut its dividend).
: The industrial sector is among the most stable, low-volatility asset classes in the United States (as evidenced by the sector's historical occupancy rates of roughly 88%-92%). How do you feel about the industrial market today?
Eugene W. Landy
: The industrial market should strengthen. The amount of industrial space needed varies directly with our gross domestic product. If the gross domestic product increases 20% in 10 years, then the nation should need 20% more industrial warehouse space. There is little new supply being built. Therefore, we are optimistic about the market for our buildings now and 10 years from now.
: Monmouth is one of the oldest REITs in the United States and the company is celebrating its 45th year as a focused net-leased industrial REIT. How have you been able to weather the storms for so long?
: Our philosophy is that real estate is a great investment vehicle. The basics are in favor of long-term real estate investment. The U.S. population grew 150,000,000 in the last 50 years and will grow another 150,000,000 over the next 50. Inflation since 1982 is 230%. The trend is with you.
The most important factor is surviving any periodic economic crisis. The task is to maintain a very conservative balance sheet so that cash is always available to meet obligations.
: Monmouth has a very stable portfolio of around 70 industrial properties and around eight and a half million square feet. Many strong tenants including
A majority of your revenue is derived from FedEx, what is the attraction to the company as it relates to the concentration of FedEx?
: FDX is a very well-run company. Its business is state of the art. The computer and the Internet have revolutionized logistics and retailing. The nation shops online and ships FDX. Our policy is to never turn down the opportunity to acquire a good FDX-leased property, so we work very hard to do both FDX and non-FDX deals.
: Monmouth has maintained a conservative capital structure consisting of around $250 million in debt, $110 million in preferred equity, and $450 million in common stock. You have a spectacular debt-to-market cap ratio of under 30 percent. Has your balance sheet always been that way?
: Not always. When we were an $80 million asset REIT, we had $40 million in capital. That was conservative, but not as conservative as we are today. We believe perpetual preferred provides long-term capital and enhances common stock long-term returns.
: Monmouth is unique in that the company owns around $45 million in REIT securities. What is your investment strategy relating to this REIT ownership?
: Our program of "REITs investing in REITs" continues to be successful. It is based on the simple premise that, when REIT shares sell at a discount from net asset value, they become excellent investments. There is an improvement in the yield and there is improvement in the safety of the investment. Investors invest for current yield plus appreciation.
Appreciation is the future increase in value of the properties over an extended period of time. When you purchase REIT shares at a discount to asset value, appreciation can be both future gain and the realization of the current discount. We buy securities for yield spread investing, appreciation and liquidity. Liquidity is paramount to operating a REIT through multiple business cycles.
: Monmouth has a market cap of around $453 million and the stock is trading at $11.21 per share. This translates into a dividend yield of 5.35%. Also, year-over-year total returns are exceeding 44%. Clearly, Monmouth is hitting all cylinders. Do you see any risks that could impact your investment platform?
: There are many favorable trends. The industrial market is getting stronger. Our borrowing costs are lower. We have a large pipeline of acquisitions. Of course, there is always the risk of unanticipated difficulties. That is why you maintain liquidity.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.