This high-yielding dividend stock is as safe as they come — even if you’ve never heard of it

With S&P 500 a bit shaky in recent weeks, many investors are looking for solid stocks to put their money into. The world’s biggest names are a given, but you may want more opportunity than the stocks the rest of the market is chasing. So how about some of the smaller guys?

For my money, the first stock I would turn to in uncertain times would be UMH properties (UMH 0.26%). You may not have heard of UMH, but there’s a lot to love about it, including a solid, uninterrupted dividend track record that spans the Great Recession.

What is UMH Properties?

UMH Properties is a real estate investment trust (REIT) focused on buying, leasing and growing mobile home parks. It owns some of the largest trailer parks in the country.

In fact, UMH has such a special moat that it doesn’t have much in the way of direct competitors, as most mobile home parks are small and relatively small owner-owned. These facilities often get a bad rap, but UMH vets its tenants just like any REIT that owns an apartment. However, it has a distinct advantage in the rental space: It can offer less expensive housing with less density and less competition.

UMH owns 135 communities, which include nearly 26,000 developed sites, and about half of them are occupied by a mobile home that UMH rents to the public. The other sites are available for rent to someone looking to move a mobile home or who has already purchased a mobile home directly from UMH. These parks are located in New Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana, Michigan, Maryland, Alabama, South Carolina, and Georgia.

Mobile homes versus apartment units

The special trench built by UMH is significant for its market. As of November 2023, the average two-bedroom apartment in the US cost renters $1,317 per month. Those renters, however, can go to a UMH community and find something similar, if not larger, to rent for just $951 per month, on average. That’s why occupancy in UMH communities averages 95.1%, even as several are experiencing expansion or redevelopment.

These rents were not far behind either. In 2022, the average rent for a UMH mobile home was $873, and before the pandemic, it was $765. The rent increase was colossal.

In addition to renting out entire homes, UMH offers rental spaces for people who already own mobile homes. Unlike stick-built homes, mobile homes are considered personal property and must have a place to be permanently installed. That’s what most mobile home communities are primarily about — offering rental lots that are completely separate from the living unit. These rental units require almost no maintenance or effort on the part of the park owner, helping to increase park revenue without significant additional costs.

UMH communities have a total of nearly 16,000 lots available for rent for people who already own mobile homes and rent them for an average of $528 per month. Again, this is just the land below the unit, access via a road and any shared green space – everything else is the homeowner’s responsibility. It’s a great way to balance out the increased risk of being a landlord for so many homes that the REIT owns outright and must maintain.

This balancing act has allowed UMH to deliver a solid dividend for years despite being a low-priced stock.

UMH’s high yield dividends are reliable

Trading at just $18.12 at the close of trading on August 6, UMH shares are accessible to anyone, no matter where they trade or how they trade. Last year’s dividend was $0.82 per share, giving shareholders an annual return of $4.53 for every $100 they invested at that price.

Although UMH’s dividend was cut in 2007 and 2008, it has remained flat or increased since then. It was understandable that 2007 and 2008 saw dividend declines as most of the world experienced severe real estate downturns. Mobile homes are not immune to global economic pressures, unfortunately.

But since 2021, the dividend has grown steadily, growing 5.5% from 2020 to 2021, 5.2% from 2021 to 2022, and 2.5% from 2022 to 2023. It is expected to rise again to 3.65. % in 2024. That’s a total dividend growth of over 18% over four years.

It may seem like a lot in such a short time, but the company has paid down debt and added value to the assets it already has. That includes 3,069 new lots in development between now and 2029, so it makes perfect sense for dividend growth to follow that effort.

For my money, UMH is the place to be. The dividends are amazing but sustainable, and people will need affordable housing in the future.