Know the Truth about Menards, Perkins and GLPI
Sometimes words can say something that is true, but they are designed to make you see something with tunnel vision. For example, the words, “Buy one, get one free,” sound so sweet until you realize that you are getting 50% off of a product that is designed to capture more of your dollars. At Perkin’s one of their Wednesday specials is, “Buy one entrée and get a second entrée free.” Well, not really. You have to buy two high-margin drinks to get the second entrée free. Menards (Save Big Money at Menards!) offers “11% off” specials. But the reality is that you get the 11% off if you submit their required paperwork and wait weeks for the coupon you can use at Menards to buy more at retail prices. Did you really get 11% off? No. The same cautions apply to investing. Here is an example using a recent dividend announcement from a REIT with the ticker symbol GLPI (Gaming and Leisure Properties, Inc.)
When is a Dividend a Dividend?
When I saw the Seeking Alpha email announcing the quarterly dividend for GLPI, my immediate reaction was, “that is wonderful news!” I don’t currently own shares of GLPI, but I watch it along with other REITs that pay a decent dividend. I knew that GLPI had been hard-hit by Covid-19 concerns, so I looked at their dividend history and saw that their last dividend was $0.12. To see a $0.60 dividend seemed odd to me. But there are some details you don’t want to miss.
Sometimes the dividend isn’t cash. If it isn’t cash, it can be more of the company’s stock. If it is more of the stock, it is really just funny money because you cannot spend it unless you sell the shares of the stock you received as a dividend. In other words, a stock dividend is just more stock, and it costs the company nothing.
A Dividend In Line With Previous
In trying to understand how the $0.60 dividend could be “in line with previous” if the previous dividend had been $0.12, I went to Fidelity to look at the more detailed news. There I saw the reality. The cash dividend is $0.12 so it was equal to the previous dividend. The other 48 cents is a stock dividend, making the total dividend $0.60.
If you have 100 shares of GLPI, you will receive $48 of GLPI stock. In other words, at a current stock price of about $39.50 per share, you will get a “dividend” of about 1.2 shares of stock. You cannot spend that dividend. You would have to sell the 1.0 share to get $39.50. What a pain. Furthermore, the stock price could drop before you sell, because other owners might sell many of their shares for various reasons.
Wise Investors Pause and Think
Whenever you review a dividend announcement, look at the dividend payout ratio, the ex-dividend date and don’t miss some of the finer details that may be hidden in the dividend announcement. All that glitters is not dividend gold.
Know Your Flocks & Herds 
When interest rates start to climb, do you start to put yourself in a position to sell your REITs?
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REITs generally provide good income for the retired investor. Interest rates for savings would have to rise to at least 3% before I would lighten up on my REIT holdings. It also depends on the REIT. Some REITs have a business model that makes them far more attractive as a long term investment. For example, STAG has a focus and customers that I find very attractive. However, most REITs are not dividend growth investments. So they won’t command a large portion of my total portfolio even in lower interest rate environments.
A REIT like “O” is also unlikely to exit my investment portfolio. They pay monthly and the yield is very attractive. The dividend is also relatively safe.
O is Realty Income Corporation.
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