Real estate investment trusts (REITs) like Realty Income Corp (NYSE:O) or mortgage REITs like AGNC Investment Corp (NASDAQ:AGNC) offer instant diversification, truly passive management, and, in many cases, comparable yields as traditional property. Chances are, you could use a couple extra bucks every month, and AGNC and O stock offer just that.
Passive income is a magical thing. It allows us to evolve past exchanging our time for money, which is the first key to getting rich. There are only so many hours in a day. There’s no limit to investing.
Many investors dream of earning enough passive income to really make a difference in their lives. For instance, $100 a month can pay for a cell phone bill or cable TV subscription, while $500 per month should be enough to cover your car expenses. Once we get to $1,000 a month, things really get exciting. That’s enough to cover rent — or a mortgage payment — in many places.
Many people try building their own passive income empires by owning real estate. There are a lot of advantages to owning a condo or single-family home, but being a landlord also comes with a fair amount of work. You’ve got to deal with tenants, coordinate repairs, and so on.
There’s a better way. Realty Income and AGNC Investment Corp are far easier ways to invest in physical real estate, but still boast plenty of advantages.
Here’s how you can earn $1,000 per month from both O and AGNC stock.
Realty Income Corp (O)
Realty Income is the largest U.S. net lease REIT with a market cap of $15.4 billion. Its portfolio consists of more than 4,700 different properties in almost every U.S. state, with 247 different tenants spanning 47 different industries. O stock recently made history by becoming the first REIT to be included in the S&P 500.
O stock has been primarily a retail real estate play, but management is working to diversify into other forms of real estate. A recent investor’s presentation puts retail at 79%, industrial real estate at 13%, office property at 6%, and agricultural land at 2% of total assets, respectively.
Realty Income has paid 559 consecutive monthly dividends and raised the payout 77 quarters in a row. With that kind of dividend growth history behind it, it’s easy to see why the company has become a perennial favorite for income investors. Heck, it even calls itself “The Monthly Dividend Company.” O shares currently yield 4%.
If you wanted to collect $1,000 per month from Realty Income alone, it would take a pretty hefty investment. At $63.15 per share, that would be roughly 4,750 shares for a total cost of just under $300,000.
AGNC Investment Corp
AGNC is a little different than Realty Income, as it doesn’t invest directly in real estate — it invests in mortgages instead. Here’s how it works:
AGNC borrows short-term money and uses it to buy long-dated mortgages that are guaranteed by one of the U.S. government-sponsored mortgage default insurers. AGNC takes the spread between the cost of borrowing and the interest received from mortgage holders as its profit.
The risks to AGNC Investment Corp are twofold. The first is that it loses its short-term funding, which crippled the industry in 2008-09. The other is interest rates increase in a hurry.