NEW YORK ( TheStreet) -- Shipping giant FedEx Corp. ( FDX) boasts a market capitalization of more than $27 billion and revenue of more than $42 billion. It's second only to UPS ( UPS) in market capitalization. The downside of this consistent performer is its 0.60% dividend yield -- not quite the material of income investors. Enter Monmouth Real Estate Investment Corp. ( MNR). Organized in 1968, this is a publicly owned real estate investment trust specializing in net-leased industrial properties subject to long-term leases primarily to investment grade tenants. Monmouth Real Estate Investment's current tenants include FedEx, Anda Pharmaceuticals, Anheuser-Busch Inbev SA ( BUD), Best Buy ( BBY), Caterpillar Logistics Systems, Coca-Cola ( KO), Kellogg ( K), Mead Paper, Sherwin-Williams ( SHW) and Siemens ( SI). So what does this triple-net-lease industrial REIT have to do with FedEx? A concentration of the company's properties are leased to FedEx. As of March 31, 2012, approximately 3.5 million square feet, or approximately 42% of the company's property, was leased to FedEx or one of its subsidiaries. In other words, FedEx supports this REIT with both its creditworthiness and its contractual leases. This, to a degree, makes Monmouth a backdoor play on FedEx. > > Bull or Bear? Vote in Our Poll
Monmouth has also recently given income investors another way to play the industrial triple-net-lease space and a cheap exposure to FedEx. Monmouth REIT issued a preferred stock this past week at a very attractive yield. It's cheap compared to preferred stock of Monmouth's triple-net competitors.
The offering is, essentially, a plain vanilla preferred stock offering containing the new conversion language. The is nothing fancy or different about the offering and nothing exotic or complex either. As the above chart shows, the new Monmouth preferred stock trades more than 1% higher than its triple-net peers, which I believe compensates an investor for its smaller size and nonrated status. The company has reduced its leverage, and coverage ratios are very healthy. This gives the company financial flexibility to further grow its portfolio in a healthy and financially prudent way. The result of Monmoth's ability to grow FFO and prudently reduce leverage has been increased profitability. All of the above factors have led to a well-performing equity that is also attractive. Ultimately, the preferred stock is attractive relative to Monmouth's outstanding issue as well as its peers, and the equity is equally attractive on capital appreciation and yield bases. Research conducted by Rubicon Associates. Mr. Michael M. Terry, CFA is the Founder/Principal of Rubicon Associates LLC and has nearly 20 years of experience in the investment management industry focused on the analysis, investment and management of fixed income and preferred stock portfolios. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.