Modiv Industrial's Preferred Stock: A Rare Blend of Defensive Income and Resilient Value

In an era of economic uncertainty, where inflation, trade tensions, and market volatility test even the most seasoned investors, few investments offer the dual appeal of Modiv Industrial's 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock (MDV.PRA). With a 7.58% dividend yield at current prices—effectively 8% when rounded—and a fortress-like balance sheet supported by 118% AFFO coverage, this preferred stock stands out as a rare opportunity to lock in high income while benefiting from a portfolio of industrial real estate tied to U.S. manufacturing resilience. Let's dissect why MDV.PRA is primed to thrive in turbulent markets.

The Dividend: A Steady Anchor in a Volatile Sea

Modiv's preferred stock trades at a $24.33 price, a 2.68% discount to its $25 liquidation preference, offering immediate value for investors. The annualized dividend of $1.84 per share is well-covered by AFFO, with the company's first-quarter 2025 AFFO rising 18% year-over-year to $0.33 per diluted share. This robust coverage ratio (118%) ensures dividend sustainability, even as Modiv continues repurchasing preferred shares to reduce leverage.

Buybacks: Fueling Per-Share Value and Financial Fortitude

Modiv's strategic buybacks of its preferred stock are a masterclass in capital stewardship. In early 2025, the company repurchased 150,000 shares at an average price of $23.50, saving $276,000 annually in dividends. By May 2025, total buybacks reached 13.8% of outstanding shares, reducing leverage and freeing cash flow for common stockholders. This action not only strengthens Modiv's balance sheet but also boosts the value of remaining preferred shares by narrowing the discount to liquidation.

A Fortress Portfolio: Industrial Real Estate Anchored to U.S. Manufacturing

Modiv's industrial REIT portfolio is no ordinary real estate play—it's a bet on the resurgence of U.S. manufacturing, a sector proving resistant to global trade headwinds. Take the 10-year lease renewal with FujiFilm Dimatix in Santa Clara, California, which included a 6.75% rent increase and 3% annual escalators. Such deals exemplify the portfolio's inflation-resistant cash flows, as tenants in high-demand industrial hubs secure long-term, fixed-rate leases.

Tenant interviews further underscore Modiv's defensive edge. Middle-market manufacturers, representing 80% of its portfolio, report minimal tariff-related disruptions, citing preparedness from past crises and U.S.-centric supply chains. One tenant noted, “Our exposure to China is less than 5% of sales—this isn't a vulnerability, it's a strategy.” This resilience positions Modiv as a beneficiary of onshoring trends and domestic manufacturing growth.

NAV Discount: A 40% Margin of Safety

Modiv's common stock trades at a 40% discount to its NAV, a gap the CEO calls “compelling” despite market jitters over tariffs and geopolitical risks. This discount is a gift for investors: preferred shareholders indirectly benefit as a narrowing NAV gap could lift the entire capital structure. With $7.78 million in ETF holdings (5.4% of market cap), institutional support is growing, signaling a potential catalyst for revaluation.

Risks? Consider the Counterarguments—and Why They're Overblown

Critics may cite Modiv's reliance on a single sector or the perpetual nature of its preferred stock. Yet the portfolio's geographic and tenant diversity—spanning 15 states and 200+ businesses—mitigates concentration risk. As for the “perpetual” label, Modiv's history of buybacks and conservative leverage (45% debt-to-asset ratio) ensures it can manage obligations even in stress scenarios.

Conclusion: A Rare Blend of Yield and Stability—Act Now

Modiv Industrial's preferred stock (MDV.PRA) is a rare find: a high-yielding security with bulletproof dividend coverage, a shrinking NAV discount, and exposure to a resilient, inflation-protected asset class. With buybacks fueling value, tenant demand holding firm, and a yield that outpaces all but the riskiest bonds, this is a stock for investors seeking defensive income without sacrificing growth potential.

The writing is on the wall: as macroeconomic clouds gather, few investments offer the dual safety and upside of MDV.PRA. Act now before the market catches on.

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