Agree Realty (ADC): A High-Yield, Low-Risk Net Lease REIT with a Stable Path Forward

In the realm of risk-averse investing, net lease REITs like Agree Realty Corporation (ADC) stand out for their ability to balance attractive yields with operational stability. As of 2025, ADC has solidified its position as a compelling option for income-focused investors, underpinned by a conservative financial strategy, a high-credit-quality tenant base, and a dividend history that reflects disciplined capital management.

Dividend Security: A Pillar of Stability

Agree Realty's dividend sustainability is anchored by its payout ratios and operational performance. In Q3 2023, the company maintained a payout ratio of approximately 74% of Core Funds from Operations (Core FFO) and 73% of Adjusted Funds from Operations (AFFO) per share according to the Q3 2023 results. These metrics, while elevated, remain within sustainable thresholds for a REIT with a long-term focus on lease stability. By Q1 2024, the company had further demonstrated its ability to grow distributions, raising the monthly dividend to $0.253 per share in early 2025-a 2.4% annualized increase from the prior year. This growth trajectory, coupled with 2025 guidance projecting AFFO per share of $4.26–$4.30, suggests a robust capacity to maintain or even enhance yields without overleveraging.

The company's portfolio strength amplifies this security. As of March 2024, Agree Realty reported 99.6% occupancy across its 2,370-property portfolio, with a weighted-average remaining lease term of 8.2 years. Such long-term contracts reduce the risk of revenue volatility, while the geographic diversification across all 50 states minimizes exposure to regional economic downturns. Additionally, 68.9% of annualized base rents in Q3 2023 were generated by investment-grade retail tenants, a figure that has likely improved with the company's focus on creditworthy lessees.

Credit Quality: A Credit Rating Upgrade and Conservative Leverage

Agree Realty's financial prudence has not gone unnoticed by rating agencies. In July 2024, S&P Global Ratings upgraded ADC's issuer rating to BBB+ with a stable outlook, citing its "sound operating performance" and "minimal near-term lease maturities." This upgrade reflects the company's ability to manage debt responsibly, as evidenced by an adjusted debt-to-EBITDA ratio of 5.9x-a level well below the industry average for net lease REITs.

The company's liquidity profile further reinforces its creditworthiness. In 2024, Agree Realty raised $1.1 billion in forward equity, bolstering its balance sheet and providing flexibility to fund growth without relying heavily on debt. This capital infusion, combined with a well-laddered debt maturity schedule and ample availability under its revolving credit facility, positions ADC to navigate interest rate uncertainty and economic cycles with minimal stress.

A Portfolio Built for Resilience

The quality of Agree Realty's tenant base is a critical differentiator. While 68.9% of base rents in Q3 2023 came from investment-grade tenants, the company's disciplined underwriting ensures that even non-investment-grade lessees operate in stable, essential-use sectors such as healthcare and industrial logistics. This approach mitigates default risk while aligning with long-term demand trends.

Moreover, the portfolio's lease structure provides a buffer against short-term challenges. With a weighted-average remaining lease term of 7.9 years as of Q4 2024, the company benefits from steady cash flows and reduced turnover costs. This stability is particularly valuable in a high-interest-rate environment, where shorter leases can exacerbate refinancing risks.

Conclusion: A Strategic Fit for Risk-Averse Portfolios

Agree Realty's combination of a high-yield dividend, conservative leverage, and a tenant- and lease-weighted portfolio makes it an ideal candidate for risk-averse investors seeking reliable income. The S&P BBB+ rating, coupled with consistent operational metrics like 99.6% occupancy and a payout ratio that remains below 80% of AFFO, underscores its ability to deliver returns without excessive risk. As the REIT continues to capitalize on its sector-leading tenant base and liquidity advantages, ADC appears well-positioned to maintain its status as a cornerstone of low-risk, high-yield portfolios in 2025 and beyond.