Agree Realty's Strategic Growth and Resilience in Q2 2025 Earnings: A Blueprint for Long-Term Dividend Growth

Agree Realty Corporation (NYSE: ADC) has long been a stalwart in the retail real estate sector, and its Q2 2025 earnings report underscores why investors should position for long-term dividend growth and AFFO (adjusted funds from operations) expansion. Despite a 18.5% decline in net income per share year-over-year, the company's Core FFO and AFFO per share rose by 1.3% and 1.7%, respectively, demonstrating operational resilience and disciplined capital allocation. This performance, coupled with a 2.4% dividend increase and a robust balance sheet, paints a compelling picture for income-focused investors seeking sustainable growth.

Capital Deployment and Development-Driven AFFO

Agree Realty's Q2 2025 results highlight its aggressive yet strategic capital deployment. The company invested $350 million in 110 retail net lease properties, raising its full-year investment guidance to $1.4 billion–$1.6 billion. These acquisitions, spread across all three of its external growth platforms, are leased to investment-grade tenants like Walmart, Tractor Supply, and Dollar General, ensuring stable cash flows. More importantly, the company's development and Developer Funding Platform (DFP) initiatives are accelerating. By June 30, 2025, 25 projects were under construction, including developments for TJX Companies, 7-Eleven, and Starbucks. These projects, which require significant upfront capital but yield long-term, high-margin returns, are poised to drive AFFO growth as they come online.

The company's AFFO per share guidance for 2025, now $4.29–$4.32, reflects confidence in this development-driven strategy. With 67.8% of annualized base rents generated from investment-grade tenants and a 99.6% occupancy rate, Agree Realty is effectively insulating itself from short-term retail volatility while building a foundation for durable, inflation-protected cash flows.

Dividend Sustainability and Payout Discipline

A critical factor for income investors is dividend sustainability. Agree Realty's June 2025 monthly dividend of $0.256 per share, a 2.4% year-over-year increase, is supported by payout ratios of 73% of Core FFO and 72% of AFFO. These conservative ratios provide a buffer against earnings fluctuations, ensuring the dividend remains secure even if net income dips. Over the first half of 2025, the company has maintained this discipline, with total dividends of $1.527 per share—again a 2.4% increase—while Core FFO and AFFO grew by 2.2% and 2.4%, respectively.

The company's ability to raise $800 million in capital through a $400 million bond offering and a $387 million equity raise further strengthens its capacity to fund growth without overleveraging. With $2.3 billion in liquidity and a pro forma net debt/EBITDA ratio of 3.1x, Agree Realty is well-positioned to sustain its dividend while pursuing strategic investments.

Strategic Leverage and Long-Term Positioning

Agree Realty's balance sheet flexibility is a key differentiator. The company's recent $400 million issuance of 5.60% senior unsecured notes, coupled with its forward equity program, has provided the liquidity needed to fund its aggressive acquisition and development agenda. This approach not only reduces reliance on short-term debt but also locks in favorable interest rates, mitigating refinancing risks in a rising-rate environment.

Moreover, the company's geographic and tenant diversification—spanning all 50 states and featuring a top tenant concentration of 6.0% from Walmart—reduces exposure to regional or sector-specific downturns. This diversification, combined with a weighted-average lease term of 8.0 years, ensures that Agree Realty's cash flows remain stable even as the retail landscape evolves.

Investment Rationale and Forward-Looking Outlook

For investors, Agree Realty's Q2 2025 results present a clear case for long-term positioning. The company's development-driven AFFO expansion, conservative dividend payout ratios, and disciplined capital structure create a compounding engine for shareholder value. By focusing on high-quality retail tenants and long-term leases, Agree Realty is not only securing current cash flows but also laying the groundwork for future growth.

Conclusion: A Dividend Growth Play with Structural Advantages

Agree Realty's Q2 2025 earnings reaffirm its status as a model of operational and financial discipline. With a focus on development projects, strategic capital raising, and a tenant base that includes household-name retailers, the company is uniquely positioned to deliver both dividend growth and AFFO expansion. For investors seeking a stable, high-quality REIT with a clear path to long-term value creation, Agree Realty offers an attractive opportunity. The key is to act before the market fully prices in its growth potential—a move that could lead to further outperformance in the years ahead.