Collect Rent From Buffett's Newest Investment – Ulta Beauty – By Doing This

Warren Buffett's Berkshire Hathaway Inc. BRK has a reputation for picking stocks of wonderful companies at fair prices, and its recent investment in Ulta Beauty Inc. ULTA highlights its confidence in both the company and the retail sector. 

While investing directly in Ulta stock like Berkshire Hathaway is certainly an option, another strategic way to generate income from the company is by owning shares in one of its largest landlords.

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Kimco Realty Corp.

Kimco Realty Corp. KIM is one of the largest owners and operators of high-quality, open-air, grocery-anchored shopping centers and mixed-use properties in the United States. As of June 30, it had ownership interests in 567 properties totaling approximately 101 million square feet of gross leasable space. 

Ulta is one of Kimco's 20 largest tenants, with 56 locations totaling approximately 531,000 square feet and representing approximately 0.8% of its annual base rent. Other notable tenants include TJX Companies, Home Depot, Ross Stores, Amazon/Whole Foods, and Burlington Stores.

"Collecting Rent"

REITs like Kimco must legally distribute a large portion of their taxable income to shareholders as dividends. By owning shares of Kimco, investors are essentially "collecting rent" from Ulta and its other tenants through these dividends.

Kimco currently pays a quarterly dividend of $0.24 per share, which equates to an annualized dividend of $0.96 per share. At the time of this writing, its stock yields approximately 4.3%. 

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Kimco says it's committed to maintaining a dividend payout ratio of about 80% of its adjusted fund from operations. As it generates higher income at existing properties by raising rents and growing its real estate portfolio, investors will see their dividend payments rise.

In fact, Kimco has raised its regular annual dividend payment each of the last two years, along with a special dividend of $0.09 per share in December 2023. Its 4.3% hike last October has it on track for 2024 to mark the third consecutive year with an increase.

So, if you're interested in gaining exposure to Ulta but don't want to invest directly in the company, buying shares of Kimco Realty would be a great way to do it.

Better Yields Than Some REITs?

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through REITs.

Arrived Homes, the Jeff Bezos-backed investment platform has launched its Private Credit Fund, which provides access to a pool of short-term loans backed by residential real estate with a target 7% to 9% net annual yield paid to investors monthly. It paid 8.1% in July. The best part? Unlike other private credit funds, this one has a minimum investment of only $100. 

As long-term rates go down and short-term rates stay high, there’s a unique chance to invest in fix & flip loans before yields drop. Check out Benzinga's favorite high-yield offerings.