When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more.
Fancy earning some untaxed income from high-yield shares to help fund retirement?
It can be within reach if we use a Stocks and Shares ISA. According to the latest data, there are nearly 5,000 ISA millionaires in the UK. In fact, since the statistics were published in late 2024, the number might have already exceeded that.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
High yield
What do I mean by high-yield shares? A large number of UK companies are mature, and pay out spare cash to shareholders as dividends. My ‘high yield’ decision depends on a few things — more than just a current headline big dividend.
A track record of beating the index average is a good start. Some companies stubbornly pay out while not having the cash to keep it going. Inevitably, something has to break, and it usually means a dividend cut. So, I want to see sufficient earnings to cover the annual dividends comfortably — and see it translate to strong cash flow.
And the business has to convince me it can keep going profitably for decades into the future. That means providing essentials, having barriers to entry, safety margins, and things like that.
A fat 8%
Primary Health Properties (LSE: PHP) ticks my boxes, so I’ll use that as an example to work out what we might achieve.
Primary Health is an investment trust. It owns and rents out a portfolio of health facilities, with its biggest client being the NHS. That business model means I see good defensive qualities and good cash prospects from long-term leases. And at the moment, we’re looking at a forecast 8% dividend yield.
With interim results, CEO Mark Davies said the trust “has delivered a strong operational and financial performance driven by rental growth across our portfolio, a value-accretive acquisition in Ireland, valuation gains and another period of dividend growth“. And he spoke of an “improving rental growth outlook“.
Analysts forecast continuing dividend raises in the coming years too. And if they’re right, rising earnings could drop the price-to-earnings (P/E) ratio under nine by 2027.
The secret is to reinvest the annual dividend income to buy more shares. So what might Primary Health’s 8% per year compound up to?
The road to £2,000
One way to hit our goal could be to invest a full ISA allowance of £20,000 every year for 10 years. That should build up to a pot of a bit over £300,000. And an annual 8% of that would get us to £2,000 per month.
We can’t all invest that much. But £600 each month could get us there in 19 years. It’s up to each of us to do the best we can.
Dividends can’t be guaranteed. And if the trust misses an expected raise, the share price could suffer. Investing in healthcare carries political risk, too, as policy can change.
So, diversification is essential. I use high-yield shares as one prong of my long-term investing strategy. And I do think investors seeking long-term income should consider including Primary Health in their Stocks and Shares ISAs.
Market optimism has waned as investors weighed mixed data, Fed guidance, and sector-specific risks after the S&P 500 hit eight record highs in September.
Strong GDP and jobs data have tempered rate cut expectations, resulting in a slight market pullback, though 89% of traders still predict an October rate reduction.
Beyond shifting rate cut expectations, seasonal weakness, upcoming earnings, and concerns around stretched valuations could contribute to market volatility.
Dividend stocks become more attractive vs. bonds as rates fall, and their steady payouts and stable cash flows help cushion portfolios against volatility.
SA Quant has explored its universe of top dividend stocks and selected five options for investors based on their exceptional Quant factor and dividend grades.
I am Steven Cress, Head of Quantitative Strategies at Seeking Alpha. I manage the quant ratings and factor grades on stocks and ETFs in Seeking Alpha Premium. I also lead Alpha Picks, which selects the two most attractive stocks to buy each month, and also determines when to sell them.
Lemon_tm/iStock via Getty Images
Mixed Signals: Economic Data Fuels Fed Uncertainty
U.S. market exuberance began to fade last week as investors tried to assess the crosscurrents of mixed economic data, Fed guidance, and sector-specific risks. The Fed’s 25 bps rate cut helped the S&P 500 reach eight record highs in September alone. Market enthusiasm was further supported by expectations of future rate cuts; the FOMC’s Sept. 17 dot plot showed policymakers projecting two additional quarter-point rate cuts by the end of 2025.
The FOMC Projects Two More 25 Basis Point Cuts in 2025 (as of Sept. 17, 2025)
The Federal Reserve Summary of Economic Projections
However, the market’s rally began to stall as Fed Chair Jerome Powell emphasized two-sided risks, warning of persistent inflation, while labor market risks are growing. Markets faltered further when expectations for an October rate cut were tempered by stronger-than-expected GDP growth and lower jobless claims. Despite the deluge of mixed data, markets still anticipate another rate cut in October, though expectations have narrowed slightly, with 11% of traders expecting rates to stay the same for the October Fed meeting.
While major averages started the week on a more optimistic note, potential volatility driven by shifting rate expectations could be exacerbated by seasonal factors. Although September delivered an uncharacteristic rally with multiple record highs, October is the second-worst-performing month for the S&P 500.
Several unknowns could fuel additional swings in the weeks ahead: Pressure from upcoming corporate earnings, continued macroeconomic uncertainty, and concerns over stretched valuations.
Dividend Shields: Top 5 Income Stocks
Dividend stocks are appealing in both falling-rate environments and during periods of market volatility, which often coincide. As policy rates drop, bond yields tend to decline, making steady dividend payouts more attractive for income investors. Dividend-paying companies, which are often more stable with consistent cash flows, can help cushion portfolios against market fluctuations and offer a reliable income stream when uncertainty spikes. This stability makes them a wise choice for investors looking for both upside and protection in choppy, unpredictable markets. SA Quant has explored its universe of top dividend stocks and selected five options for investors based on their exceptional Quant factor and dividend grades.
When evaluating dividend stocks, I try to look beyond headline yields, analyzing the safety and growth potential of a given dividend. Leveraging Seeking Alpha’s stock screener, I selected “Top Quant Dividend Stocks” to get my initial universe of high-quality income stocks.
Seeking Alpha
From there, I selected five stocks from the list that represent a blend of sectors and industries, favorable dividend grades, and forward yields. This basket of five stocks has an average dividend yield of 4.66%, well above the 1.10% for the S&P 500 and 1.65% for Vanguard Dividend Appreciation Index Fund ETF Shares (VIG).
Top 5 Dividend Stocks for Steady Income Have an Average FWD Yield of 4.66% versus the S&P 500’s 1.10%
SA Premium
As I mentioned, these stocks were evaluated along multiple dividend grades, including safety and growth. The dividend safety grade leverages a sophisticated data-driven approach to offer a reliable assessment of a company’s ability to keep paying its dividends and avoid dividend cuts.
Dividend Cuts Can Be Avoided With Strong Dividend Safety Grades
Seeking Alpha
Similarly, based on data-driven analysis, the dividend growth grade provides an instant characterization of a company’s ability to grow its dividends. This tool is valuable for income-focused investors who want to target companies with the potential for capital appreciation as well as pinpoint companies with better dividend growth prospects.
Seeking Alpha
Note that because these stocks were holistically evaluated across factor and dividend grades, they do not represent the highest-yielding dividend stocks. Instead, they are a combination of dividend yield, safety, and growth, in addition to high factor grades and a Quant “Strong Buy” recommendation.
If you’re looking for stocks with the highest potential for capital appreciation, consider Alpha Picks. While it doesn’t target dividends specifically, about a third of the selections do generate income alongside their growth potential. Alpha Picks highlights Seeking Alpha Quant’s best monthly ideas, chosen from hundreds of Strong Buy–rated stocks, and focuses on high-quality opportunities with strong financials and attractive valuations.
Quant Sector Ranking (as of 9/30/2025): 34 out of 688
Quant Industry Ranking (as of 9/30/2025): 5 out of 38
Quant Rating: Strong Buy
FWD Yield: 7.22%
As a leading provider of personal and auto loans for non-prime consumers, OMF offers its services through both branches and digital channels. Strong originations of high-quality loans, improved credit trends, and disciplined balance sheet management have contributed to the company’s ‘B+’ Profitability. The company offers an ROE of nearly 21%, which is 90% above the sector median, alongside nearly $2.9B in cash from operations.
Strategic initiatives such as loan consolidation offerings, increased automation, and cross-selling between credit cards and loans have enhanced the firm’s growth. From a Quant perspective, growth highlights include an EPS FWD Long Term Growth (3-5Y CAGR) that is almost 87% above the sector median and a FWD EPS diluted growth of nearly 14%.
OMF Growth Grade
SA Premium
OMF’s FWD dividend yield is 134% above the sector median and has delivered five consecutive years of increases. The dividend is also backed by a “B+” Dividend safety grade, supported by a cash dividend payout ratio that’s 64% below the sector median. OMF’s success in the face of macroeconomic uncertainty, including solid credit improvement and expanding high-quality loan originations, bodes well for its future potential.
Quant Sector Ranking (as of 9/30/2025): 50 out of 688
Quant Industry Ranking (as of 9/26/2025): 7 out of 52
Quant Rating: Strong Buy
FWD Yield: 2.01%
Property and casualty insurer THG has been propelled by a combination of record-setting financial performance, strategic business execution, and positive sector sentiment. The company’s exceptional Q2 earnings beat, including 25% earnings growth on an ex-catastrophe basis, has led to universal upward analyst revisions.
THG Revisions Grade
SA Premium
Margin improvements across all core segments have contributed to the stock’s solid profitability. THG boasts an ROE that is 78% above the sector median and has $854M in cash from operations vs. the sector’s $175M. Several strategic initiatives, including tech and operational investments and geographic diversification, have helped the company secure sector-leading growth. The company possesses both year-over-year and forward-looking earnings growth in excess of 100%.
THG Growth Grade
SA Premium
From an income perspective, THG’s dividend growth potential stands out with a one-year growth rate that’s 50% above the financials sector, accompanied by 18 consecutive years of increases. THG’s track record of strong execution, ongoing investments and technology, and capital allocation discipline indicates that both its share price and dividend are well-conditioned for continued growth.
Quant Sector Ranking (as of 9/30/2025): 11 out of 176
Quant Industry Ranking (as of 9/30/2025): 2 out of 17
Quant Rating: Strong Buy
FWD Yield: 6.28%
I recently wrote an article titled REITs for A Rate-Cut Rebound: My Top 5 Picks, focused on stocks that could benefit from easing monetary policy. My next stock selection is the No. 2 Quant-ranked Health Care REIT. LTC Properties focuses on senior housing and healthcare properties through investments in assisted living, memory care, and skilled nursing facilities. The company is poised to capitalize on a seismic demographic shift as more than four million Americans turn 65 each year through 2027. LTC is in the process of transitioning from a triple net lease REIT to an owner and operator model, aligning interests and creating opportunities for growth.
Propelled by robust occupancy trends, the company boasts incredible profitability supported by an AFFO margin of 63%, as well as an interest coverage ratio of 3.6x. LTC’s disciplined financial management provides a measure of safety to the company’s outstanding 6.28% dividend yield. LTC’s enticing valuation is supported by solid underlying metrics, including a FWD price/AFFO that’s 15% discounted to the REITs sector. This unique combination of yield, growth, profitability, and value makes LTC a standout in the rapidly expanding senior care market.
Quant Sector Ranking (as of 9/30/2025): 36 out of 971
Quant Industry Ranking (as of 9/30/2025): 15 out of 472
Quant Rating: Strong Buy
FWD Yield: 2.81%
Global biopharmaceutical Gilead Sciences has a robust commercial portfolio across a variety of innovative therapies in virology, oncology, and more. The company is distinct from many of its peers in that its core products are largely manufactured in the U.S., making it less exposed to tariff-related cost pressures, which have weighed on the sector lately.
“Starting October 1st, 2025, we will be imposing a 100% Tariff on any branded or patented Pharmaceutical Product, unless a Company IS BUILDING their Pharmaceutical Manufacturing Plant in America,” Trump said in a social media post late Thursday.
Gilead CEO Daniel O’Day noted in the company’s Q1 earnings call that the “vast majority” of the company’s IP and more than 80% of its profits are recognized in the U.S. This structural difference should continue to advantage the company from a profitability standpoint, with an EBITDA margin that is nearly 400% above the sector median.
GILD Profitability Grade
SA Premium
GILD impresses across key valuation metrics, trading at a FWD PEG that’s 65% below the sector median as well as a price cash flow of 12.6x vs. the sector’s 14x. The company is projected to enjoy long-term earnings growth with a 3-5YR CAGR of 20%. While its 2.81% yield may be modest for dividend seekers, its growth potential is pronounced; GILD’s 10Y CAGR Dividend Growth Rate of 14% is double that of the sector’s. With excellent fundamentals and a steady but growing dividend, Gilead is well positioned within the sector for gains.
Quant Sector Ranking (as of 9/30/2025): 19 out of 176
Quant Industry Ranking (as of 9/30/2025): 2 out of 13
Quant Rating: Buy
FWD Yield: 4.98%
ALEX, which specializes in Hawaiian retail and office properties, has been a Quant “Strong Buy” or “Buy” since March. Its forward yield of 4.98% is supported by robust dividend safety metrics, including a dividend payout ratio that’s 132% above the sector median. The company stands out as a strong choice for the current moment, as the real estate sector stands to gain from Fed easing, potentially expanding growth for REITs like ALEX.
In Q2, the company experienced a strong double-beat driven by higher occupancy and major development wins. These gains have helped shore up the company’s ‘B+’ Profitability grade, with highlights including an FFO to Gross Margin of 92%. ALEX also sports compelling Quant growth metrics, including an AFFO FWD growth that’s nearly 300% above the sector median.
ALEX offers investors a reliable income through three years of steady dividend growth and strong fundamentals for those interested in the niche market.
Stay the Course, Collect the Yield
Market optimism began to fade last week as investors digested mixed data, Fed guidance, and sector-specific risks following eight S&P 500 record highs in September. Stronger-than-expected GDP and job numbers called future rate cuts into question, though the majority of traders still anticipate more easing in October. Beyond shifting rate cut expectations, volatility may intensify due to seasonal weakness, corporate earnings, and stretched valuations. Falling rates make dividend stocks relatively more attractive versus bonds, and their stable payouts provide a buffer against market swings. SA Quant has identified five top dividend stocks based on exceptional factor and dividend ratings, to help investors navigate this period. SA’s Quant Team used its stock screening tool to identify five dividend stocks with strong quant ratings, and excellent dividend growth and safety grades.
“Perhaps we should anchor to today’s multiples as the new normal”: Savita Subramanian at Bank of America (NYSE:BAC) echoed thoughts that AI growth and resilient earnings could justify today’s valuations – some approaching dot-com bubble levels.
Michael Foster, Investment Strategist Updated: September 29, 2025
Small caps are (finally!) back, but most people are in the dark about how to tap them for serious dividends. But there is a proven way to do that—one that puts a rich 7.1% payout squarely on the table for us.
Everyone has missed this one. We’re going to dive into it today.
The main reason I hate to see people ignore small caps—especially now—is that, well, their time has come.
Small Caps Have Lagged for Years—And They’re Due for a Bounce
As you can see, It’s been a solid decade of small-caps delivering, well, small profits to investors. But it’s time for the script to flip. In fact, it’s already happening:
Small Caps See a Summer Bounce
After years of being dusted by big caps, small caps are matching them point for point this year—even pulling ahead, going by the performance of the benchmark iShares Russell 2000 ETF (IWM) in orange above, over the last three months.
I see that continuing.
For one, small firms tend to have close, personal relationships with clients, keeping their loyalty—and small firms’ sales along with it—strong. Moreover, they tend to be domestic, so they directly profit from the US economy’s strength (which we discussed in last Thursday’s article) and get a hedge from global headaches (including on trade), too.
But What About the Dividends?
Of course, there are drawbacks to buying these “small fry”: For one, unless the company is near where you live, say, or factors into your work life, you probably don’t know much about it. That’s unlike, say, big caps like Microsoft (MSFT), which get loads of analyst and media coverage.
Another, of course, is the dividends. Many small caps are earlier in their growth process—and if they’re lucky, on their way to becoming tomorrow’s large caps. Unfortunately, this means many can’t afford to both fund that growth and pay dividends.
This is why, for the most part at my CEF Insider service, we’ve focused on closed-end funds (CEFs) that hold large caps and high-yield bonds. Not only have they delivered bigger gains than small caps, but they’ve been handing us high, steady dividends, too.
You get a sense of that when you compare the average CEF yield—8.3%—with the payout on the small-cap benchmark iShares Russell 2000 ETF (IWM): a mere 1%.
Still, every rule has its exception.
When it comes to small caps, that exception is a CEF called the Royce Small-Cap Trust (RVT). This fund (in orange below) has closely tracked small caps, but with a twist: It “translates” small cap gains into dividends—7.1% payouts, to be exact.
RVT Turns Small Cap Gains Into Dividend Cash
The power of a fund like RVT is in its structure: the managers at Royce Investment Partners invest in many different small caps—488, to be exact.
Its three top holdings are IES Holdings (IESC), Assured Guaranty (AGO) and SEI Investments (SEIC). Note this chart:
Top Holding Explodes, 2 Others Gain
IESC (in blue above) installs electrical and technology systems for businesses and had $2.9 billion of sales in its latest fiscal year. Revenue soared 16% in the latest quarter on strong data-center growth (no surprise there). Meantime over at financial firm SEIC (in orange), EPS jumped 70% and revenue jumped 8% in the latest quarter, driven in part by higher interest in alternative investments.
As for financial-insurer AGO (in purple), the firm saw net income rise 32% in the last quarter as municipalities continued rolling out bonds at a record pace.
All of these stocks’ gains are pushing up RVT’s net asset value (NAV, or the value of its underlying portfolio), putting a lift under its share price. Royce’s job is to take profits on its winners and use its gains to buy up-and-comers and maintain its 7.1% dividend.
Now, to be sure, RVT’s dividend does float a little. That’s because it has a mandate to pay dividends at a yearly rate of 7% of the average of the last four quarters of NAV (calculated at quarter-end). So if NAV rises, payouts do, too.
I like this payout strategy because it means the fund is not bound to a fixed payout and has flexibility to reinvest gains in other opportunities where it sees them. And even with that flexibility, RVT’s dividend has been remarkably consistent (and even up modestly) over the last five years:
Moreover, RVT is still available at a 9.2% discount to NAV. That markdown has momentum, too, up from double digits in late August.
RVT Is Cheap, With a Discount Trend We Like
Given that RVT’s discount shrunk below 6% in January, before tariff fears sent it plunging in the spring, we still have potential for upside on a closing discount here.
The bottom line is that RVT has been doing a good job of “translating” small cap gains into 7% dividends for a long time. That’s why, as small cap momentum ramps up, we see the fund as a good one in which to slowly build a position.
Aquila Energy Efficiency Trust PLC ex-dividend date CT Private Equity Trust PLC ex-dividend date European Opportunities Trust PLC ex-dividend date F&C Investment Trust PLC ex-dividend date Invesco Asia Dragon Trust PLC ex-dividend date Law Debenture Corp PLC ex-dividend date Manchester & London Investment Trust PLC ex-dividend date Murray International Trust PLC ex-dividend date North American Income Trust PLC ex-dividend date Pantheon Infrastructure PLC ex-dividend date Petershill Partners PLC ex-dividend date Real Estate Investors PLC ex-dividend date RIT Capital Partners PLC ex-dividend date Schroder European Real Estate Investment Trust PLC ex-dividend date Schroder Japan Trust PLC ex-dividend date Shires Income PLC ex-dividend date STS Global Income & Growth Trust PLC ex-dividend date UIL Ltd ex-dividend date Value & Indexed Property Income Trust PLC ex-dividend date
If your plan is to take out an annuity, it’s out of your control as you do not what rate you will be offered when your retire. It could be.
Canada Life figures show the 65-year-old with a £100,000 pension pot could buy an annuity linked to the retail price index (RPI) that would generate a starting annual income of £3,896. That’s up from £2,195 in the New Year following a 77% spike in rates this year. Oct 22
It could be more or it could be less, a huge gamble which will effect the rest of your life.
Using the 4% rule, recent studies state that 4% may be too high but we will go with the figure. Again you can’t control the final amount you will have in your portfolio.
Latest comparison if your plan is for the tail and not the body, you fail by the month with a dividend re-investment plan.
The snowball
2025 Income £9,120.00
Dividend total for the quarter ending 30 Sep £9,794.00. Do not scale to reach an end of year figure as it includes a special dividend from VPC.
Comparison share VWRP £145,534. Not too shabby but a ‘pension’ of £5,821 using the 4% rule. The figure could be higher at the end of the year or it could be lower.
Almost nothing saved? Here’s how you can still build a second income portfolio by investing
Millions of Britons have almost nothing saved, but that doesn’t mean they can’t start working towards a life-changing second income from today.
Posted by
Dr. James Fox
Published 29 September
Image source: Getty Images
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.
Many people assume that without a large pot of cash already saved, the dream of generating a second income from investing is out of reach. But the reality is that even starting from almost nothing, a disciplined approach can still build a meaningful income stream over time.
The key lies in consistency. Let’s imagine a new investor can put aside just £250 a month into a Stocks and Shares ISA. That’s £3,000 a year. If those funds are invested in a diversified portfolio that generates an average annual return of 7%, the portfolio could grow to around £125,000 after 20 years.
At that point, drawing a 5% income from the portfolio would provide more than £6,000 a year. While it may not replace a salary, it represents a valuable supplementary income stream, particularly in retirement.
Of course, the more we contribute and the more successful we are at investing, the larger the end figure. Indeed, £500 a month in contributions could build a pot in excess of £250,000 in the same timeframe, potentially generating over £12,000 annually at a 5% withdrawal rate.
The strategy isn’t about chasing quick wins, but about harnessing compounding. There are risks, of course. Stock markets are volatile, and returns are never guaranteed. But history shows that patient, regular investing has rewarded those who stick with it.
Even if starting with almost nothing, consistency and discipline can transform modest monthly contributions into a powerful second income portfolio over the long term
These 6%- to 13%-Paying Landlords Love Jerome Powell Right Now
Brett Owens, Chief Investment Strategist Updated: September 26, 2025
The Fed has finally cut rates, and if the “dot plot” is any indication, it won’t be the last. This is fuel for real estate investment trusts (REITs)—they thrive when borrowing costs fall and their fat dividends shine next to shrinking bond yields.
Today we can lock in payouts between 6% and 13% from landlords set to surge as Powell’s long-awaited pivot plays out.
Why do REITs rally as rates fall? These stocks act as “bond proxies” that move alongside bonds and opposite rates. Here is a major REIT ETF plotted against the 10-year Treasury yield. As you can see, when the important rate zigs, the REIT benchmark zags:
REITs Zig When Rates Zag
Rate cuts don’t always hit the 10-year overnight. But the direction is now clear—and history shows that REITs rally once the bond market adjusts. So, let’s look at a lineup of landlords yielding up to 13.3% that are ready to ride Powell’s pivot higher.
We’ll start with Healthpeak Properties (DOC, 6.5% dividend yield). Healthpeak owns 702 properties across outpatient medical, labs and senior housing. This blend has weighed on 2025 results because labs have been weak. However this “property patient” has perked up since August, when a sad jobs report foreshadowed the September rate cut.
In other words, the Fed is driving this rebound:
Healthpeak: Riding High on Rates Over Fundamentals
Broadstone Net Lease (BNL, 6.3% dividend yield) specializes in single-tenant commercial properties. Currently, its portfolio is made up of 766 properties in 44 states and four Canadian provinces, leased out to a whopping 205 tenants representing more than 50 industries.
Its blend looks a lot different than it did even a year or two ago—Broadstone has been actively shedding healthcare properties, which made up roughly 20% of annualized based rent back in 2024 but now accounts for less than 4% of ABR. Today, industrial makes up roughly 60% of ABR, retail accounts for more than 30%, and office buildings drive most of the remainder.
Broadstone deals in “net leases,” where tenants cover taxes, insurance and maintenance costs. BNL just collects rent. Those long-term leases, with built-in 2% rent escalators, deliver the steady cash flows we want from a landlord.
I said more than a year ago that although its transformation might weigh on earnings in the short term, “the renewed portfolio focus is a benefit to BNL.” At the time, insiders thought so too.
All of us were right.
But Broadstone’s Success Is Missing One Critical Component
Broadstone’s doing a lot that we can like. It looks like it’s handling the bankruptcies of tenants At Home and Claire’s in stride. Management expects that its burgeoning build-to-suit pipeline will reach its $500 million end-of-year goal.
But it’d be nice to see BNL share the wealth. The company recently updated its full-year guidance for adjusted funds from operations (AFFO), expecting $1.48 to $1.50 per share. It’s on track to pay $1.16. BNL could easily boost its dividend. Management just hasn’t shared the wealth yet.
Global Net Lease (GNL, 9.4% dividend yield) is another commercial net-lease operator, and it has a significant international bent.
GNL’s 911-property portfolio spans 10 countries. North American operations (U.S. and Canada) account for 70% of straight-line rents; eight European companies account for the remaining 30%. The average remaining lease term isn’t as long as Broadstone’s, at just over six years, but it does utilize rent escalators, which are on 88% of leases.
Global Net Lease has also been busy trying to improve its operations. It recently completed the $1.8 billion sale of its multitenant retail portfolio, which improved overall occupancy and improved its annualized net operating income (NOI) margin. It has been buying back stock. And it has been rapidly deleveraging—GNL has shed $2 billion in net debt in roughly a year. During the company’s most recent earnings call, CEO Michael Weil noted that “S&P Global upgraded our corporate credit rating to BB+ from BB and raised our issuer level rating on our unsecured notes to investment-grade BBB- from BB+.”
The stock has been doing exactly what we’d expect in the midst of that kind of turnaround, beating the pants off the real estate sector year-to-date.
But There’s Still a Big Black Mark We Need to Talk About
GNL’s past payout cuts weren’t by choice—they were survival. Dividend coverage looks fine today, but only if cash flow keeps climbing.
A couple “hybrid” REITs—Armada Hoffler Properties (AHH, 7.7% dividend yield) and Brandywine Realty Trust (BDN, 13.3% dividend yield) are benefiting from a one-two punch: declining rates and return-to-office mandates.
But both cut payouts this year and their balance sheets leave no margin for error:
2 Big Yields, But 2 Very Recent Distribution Cuts
Armada Hoffler kicked off 2025 with weak guidance and a quick dividend cut. It’s still on pace for a significant drop in FFO, and its guidance hasn’t changed, but the most recent quarter saw at least a few green shoots, including a slight improvement in same-store cash NOI growth.
Brandywine, while a hybrid REIT, is much heavier in office influence. BDN owns 63 properties representing ~11.8 million rentable square feet, and office space accounts for just less than 90% of each (56 properties representing ~10.4 million rentable square feet).
Joint ventures have been Brandywine’s Achilles’ heel of late; some of its development deals force BDN to recognize numerous costs until the projects become profitable, and that has resulted in significant downward revisions to FFO estimates. Relief could be on the way, though, as several JVs could be recapitalized in coming quarters. Brandywine also secured a massive deal with Nvidia (NVDA), which will occupy nearly 100,000 square feet in BDN’s One Uptown development in Austin.
But let’s keep a really close eye on the dividend. The payout was 107% of FFO through the first half of 2025, and full-year FFO are expected to just barely pay for the dividend. If Brandywine runs into liquidity issues, that 13%-plus yield could be a rug-pull just waiting to happen.
