How to invest your maximum Social Security benefit of $4,194 in dividend stocks

If you retire this year at age 70, you can receive the maximum Social Security benefit of $4,194 per month and can make your new cash flow work for you, even if you no longer work yourself.

Of course, that’s true no matter when you retire or how much you cash in each month. Investing in stocks that generate passive income can give you portfolio growth as well as spending money on dividend payments. A great place to look is in real estate investment trusts (REITs).

REITs are pools of income-generating real estate that are required by tax law to pay at least 90% of their taxable income to shareholders. There are more than 200 publicly traded REITs that cover a wide variety of industries, providing the opportunity to diversify and pick particularly promising industry sectors.

Alexandria Real Estate Stocks (TO BE -2.44%) and Gladstone Commercial (GOOD -2.28%) are two that I own and plan to hold during my retirement years, which are just beginning.

Alexandria is a large owner-operator of life sciences properties, while Gladstone Commercial invests in office and commercial space. The former behaves a bit more like a growth stock and the latter a bit more like an income stock, as you can see in this chart showing their respective price movement and yield over the past 10 years.

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The Outlook for Gladstone and Alexandria

There are of course no guarantees here, but both companies have a long track record of solid performance and good prospects. Gladstone Commercial is one of four Gladstone companies, all of which pay monthly dividends. The other three are Gladstone Land, Gladstone Investmentand Gladstone Capital.

As for Gladstone Commercial, those revenues come from a current portfolio of 136 properties in 27 states with a customer list of 112 tenants in 19 industries. The current mix is ​​52% industrial and 44% office, but the company plans to focus on industrial in the future.

CEO David Gladstone said in a: Motley Fool Live interview on Aug. 23 that all 15 of that REIT’s current acquisition prospects are industrial properties and that he has serious doubts about the office industry as the nature of the workplace evolves.

He also said his company deliberately manages its interests to provide a steady, predictable income stream. Gladstone Commercial is doing particularly well, with 122 consecutive monthly payments and a return of about 7.5% — one of the highest of stock REITs — that hasn’t changed much in the past decade.

Alexandria shares, meanwhile, are yielding about 3%, building on a record 13 consecutive years of at least one dividend increase. Owner of approximately 75 million square feet of high-quality lab and office space, gathered in collaborative clusters in markets such as Boston, San Francisco, New York City and North Carolina’s Research Triangle, is coming off one of the strongest quarters to date, with rent increases and demand for space in its growing portfolio, which promises even more strong performance.

A look at total returns and the power of dividends

Back to that point about Alexandria being a bit more of a growth stock and Gladstone Commercial a bit more of an earnings game. It turns out that the difference in total return in the long run is not that big between the two.

Check out this chart. It shows that Gladstone Commercial’s share price has only risen about 16% over the past 10 years, but due to the dividend payments, the total return is close to 160%. Alexandria’s stock is up about 118% in that time and the total return is about 196%.

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The chart also shows the power of compounding through reinvestment, if you don’t take the money and run every month. But don’t expect to double your money or anything close to that without a substantial skin in that particular game. For example, to earn $4,200 a month in dividends, you would need to accumulate a return of about 5% on about $1 million invested.

That’s not realistic or advisable if you’re considering investing a large portion of your investable assets in just two stocks – this one or the other.

But if you split your $4,194 — or whatever amount — between Alexandria and Gladstone Commercial, you’d still get a current yield of about that 5%. Alexandria pays quarterly and Gladstone monthly, but either way and collectively, that’s not too shabby, especially for those who want their golden years to shine, for now or later.

Marc Rapport has positions in Alexandria Real Estate Equities and Gladstone Commercial. The Motley Fool holds positions in and recommends Alexandria Real Estate Equities and Gladstone Land. The Motley Fool has a disclosure policy.

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