Collect stable income up to 4.1% by being the landlord of GameStop and AMC — gain exposure to red-hot meme stocks without the crazy volatility
It has almost been one year since the meme stock frenzy started in late January 2021.
In just a few trading sessions, names like GameStop and AMC Entertainment saw their stock prices shoot through the roof.
But parabolic runs don’t last forever.
Shares of both GameStop and AMC pulled back substantially shortly after. And while these stocks have largely managed to recover — GameStop soared more than 10% Friday on its NFT plans — they remain extremely volatile investments.
If you’d like to play these names without the high volatility, there are more stable ways to do it.
For instance, some real estate investment trusts own properties leased to these companies. REITs collect rental income from their properties and pass it to shareholders in the form of dividends.
Here’s a look at two stocks that allow investors to become landlords of GameStop and AMC — one could be worth purchasing with some of your extra cash.
Headquartered in Santa Monica, Calif., Macerich is a REIT that focuses on the acquisition, management, and development of regional malls in the U.S.
The company currently owns around 49 million square feet of real estate, which is primarily made up of interests in 45 regional town centers.
And GameStop happens to be one of its tenants.
Macerich pays quarterly dividends of 15 cents per share, which translates to an annual yield of 3.2% at today’s prices.
In Q3 of 2021, the company’s funds from operations came in at 45 cents per share. Meanwhile, portfolio occupancy improved 90 basis points sequentially to 90.3%.
The average rent per square foot at the end of September 2021 was $62.58, up 0.5% compared to a year ago.
Macerich also plans to reduce its leverage.
“We expect to generate free cash flow after payment of dividends and recurring capital expenditures, exceeding $200 million per year over the next few years,” said CFO Scott Kingsmore in the Q3 conference call, “which, with a quickly improving operating environment, supports a path to continued leverage reduction to approximately 8x by the end of 2023.”
The COVID-19 pandemic has negatively impacted business at many brick-and-mortar retailers. But Macerich has made a strong comeback over the past year while its shares remain below their pre-pandemic level.
Realty Income (O)
If you follow real estate stocks, you’ve probably heard of Realty Income.
The San Diego-based REIT has a portfolio of nearly 11,000 properties that are under long-term lease agreements with its commercial tenants.
AMC is one of the top 10 tenants of Realty Income, accounting for 2.5% of the company’s total portfolio annualized contractual rental revenue.
The theatre business was hit hard by the pandemic.
But Realty Income didn’t have to worry too much about it because it has a highly diversified base of rock-solid tenants. Its top 10 tenants also include pandemic-proof companies such as Walmart, FedEx, and Walgreens.
In fact, the company collects around 50% of its total rent from investment-grade tenants.
A diversified, high-quality tenant base allows Realty Income to pay reliable dividends.
Since the company was founded in 1969, it has paid 617 consecutive monthly dividends. Moreover, the REIT has announced 114 dividend increases since its listing on the NYSE in 1994, with the last 97 being consecutive quarterly increases.
In other words, Realty Income shareholders not only received dividend checks on a monthly basis, but also got a “pay raise” every three months.
Trading at $71 apiece, the REIT provides an annual dividend yield of 4.1%.
If you don’t want to pick individual dividend stocks, remember you can always build a passive income portfolio just by using some of your spare change.
A colorful alternative
Ultimately, the reason why investors are attracted to meme stocks is their potential to provide astronomical gains. But to earn oversized returns, you don’t have to limit yourself to the stock market.
For instance, contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.
It’s a real physical asset with little correlation to the stock market.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.