Agree Realty's Dividend Growth: A Balancing Act for REIT Investors

Agree Realty Corporation (ADC) has long been a staple for income-focused investors, boasting a history of consistent dividend increases. However, the recent surge in its monthly common dividend-most notably a 3.6% year-over-year jump to $0.262 per share in October 2025Agree Realty Declares Increased Monthly Common Dividend^[4]-has sparked renewed interest in the REIT's sustainability strategy. For REIT investors, the question is no longer whether Agree Realty can grow its dividend, but whether it can do so without compromising long-term financial stability.

Dividend Growth: Momentum and Historical Context

Agree Realty's 2025 dividend trajectory reflects a disciplined approach to growth. The company has raised its monthly payout by 2.4% in each of the first two quarters of 2025Agree Realty's 179% Dividend Payout: A Deep Dive into External Funding Dynamics^[1], culminating in an annualized rate of $3.072 per share by AugustAgree Realty's 179% Dividend Payout: A Deep Dive into External Funding Dynamics^[1]. This consistency is a hallmark of the REIT's strategy, with annualized dividends climbing from $0.227 in December 2021 to $0.262 in October 2025Agree Realty Corporation Reports Fourth Quarter and Full Year 2024 Results^[5], representing a compound annual growth rate (CAGR) of approximately 3.8% over four years.

Yet, this momentum masks a critical nuance: the company's five-year average dividend growth rate is negative (-16.21%)Agree Realty Corp. (ADC) Dividends^[3]. This discrepancy underscores the volatility of REITs in a shifting economic landscape, where short-term gains can obscure long-term trends. For investors, the challenge lies in distinguishing between sustainable growth and temporary tailwinds.

Sustainability: The Payout Ratio Conundrum

While Agree Realty's dividend increases are impressive, the REIT's payout ratio raises red flags. In Q2 2025, the company paid out 178.6% of its diluted earnings per share in dividendsAgree Realty's 179% Dividend Payout: A Deep Dive into External Funding Dynamics^[1], a figure that exceeds the 90% threshold typically considered unsustainable for REITs. This overpayment is not a new phenomenon; the REIT has relied on external financing and operating cash flow to fund its payoutsAgree Realty's 179% Dividend Payout: A Deep Dive into External Funding Dynamics^[1], a strategy that hinges on access to capital markets.

Data from the company's 2025 guidance reveals a paradox: while ADC raised its investment target by 47% to $1.3–$1.5 billionAgree Realty (ADC) Elevates 2025 Investment and Dividend Guidance^[2], it simultaneously increased liquidity to $1.9 billionAgree Realty (ADC) Elevates 2025 Investment and Dividend Guidance^[2]. This financial flexibility allows Agree Realty to fund dividends without immediate operational strain, but it also exposes the REIT to refinancing risks. If interest rates rise or credit conditions tighten, the cost of sustaining this payout could escalate, potentially forcing a dividend cut-a scenario REIT investors dread.

Implications for REIT Investors

For income-focused investors, Agree Realty's dividend growth is a double-edged sword. On one hand, the REIT's 3.6% increase in October 2025Agree Realty Declares Increased Monthly Common Dividend^[4] and its 47% boost in investment guidanceAgree Realty (ADC) Elevates 2025 Investment and Dividend Guidance^[2] signal confidence in its business model. On the other, the high payout ratio and low Dividend Sustainability Score (DSS) and Dividend Growth Potential Score (DGPS)Agree Realty Corp. (ADC) Dividends^[3] suggest that the dividend's longevity is contingent on external factors.

This dynamic creates a unique risk-reward profile. Conservative investors may find the REIT's reliance on financing and its elevated payout ratio too precarious, while growth-oriented investors could view the 3.8% CAGR and $1.9 billion liquidityAgree Realty (ADC) Elevates 2025 Investment and Dividend Guidance^[2] as a green light for continued reinvestment. However, the latter group must also consider the broader REIT market: with interest rates at multi-decade highs, the cost of capital is unlikely to remain favorable indefinitely.

Conclusion

Agree Realty's dividend growth story is one of momentum and ambition, but it is not without caveats. The REIT's ability to fund its payouts through liquidity and strategic investmentsAgree Realty (ADC) Elevates 2025 Investment and Dividend Guidance^[2] is commendable, yet the 178.6% payout ratioAgree Realty's 179% Dividend Payout: A Deep Dive into External Funding Dynamics^[1] and negative five-year growth averageAgree Realty Corp. (ADC) Dividends^[3] demand scrutiny. For REIT investors, the key takeaway is that Agree Realty's dividend is a product of both operational strength and financial engineering-a combination that can deliver returns but also amplify risks in a volatile market.

As the REIT navigates 2025–2026, its success will depend on maintaining its liquidity while aligning dividend growth with earnings. Until then, investors must weigh the allure of consistent payouts against the realities of a payout ratio that stretches the boundaries of sustainability.