Best Monthly Dividend REITs
For investors looking to earn a monthly income from stocks, one sector stands out: real estate. Due to the fact that tenants have to pay rent on a monthly basis, some real estate investment trusts (REITs) have decided to reward investors with monthly dividends. In this article, we are going to take a look at the potential three best monthly dividend REITs for 2017.
Other than a stable business model, REITs also stand out because of their generous payouts. In the U.S., a company that’s qualified as a REIT is required by law to distribute at least 90% of its profits every year to investors in the form of dividends. In return, REITs do not have to pay any tax at the corporate level. (Source: “Real Estate Investment Trusts,” U.S. Securities and Exchange Commission, last accessed August 30, 2017.)
With a pass-through tax structure and mandatory distributions, REITs have become some of the highest-yielding instruments in today’s stock market. The three monthly dividend REITs we are about to look at have an average dividend yield of 5.05%. To give you some perspective, the average dividend yield of all S&P 500 companies right now is just 1.92%.
List of 3 Best Monthly Dividend REITs
| Sr.No | Company Name | Stock Exchange | Ticker Symbol | Dividend Yield |
| 1 | Realty Income Corp | NYSE | O | 4.46% |
| 2 | EPR Properties | NYSE | EPR | 5.96% |
| 3 | LTC Properties Inc | NYSE | LTC | 4.74% |
#1 Realty Income Corp
When it comes to monthly dividend REITs, one name stands out: Realty Income Corp (NYSE:O).
In fact, Realty Income brands itself as “The Monthly Dividend Company,” and it deserves that title. This is because, since the company’s founding in 1969, it has made 569 consecutive monthly dividend payments. (Source: “Dividend Payment Information,” Realty Income Corp, last accessed August 30, 2017.)
Moreover, the payments have grown quite a bit over the years. Since the company’s initial public offering in 1994, it has raised its payout a total of 92 times, including 79 consecutive quarterly increases. During that period, Realty Income’s annualized dividend has been increasing at a compound annual growth rate of 4.7%.
A few percent of dividend growth per year may not seem like much. But over time, they could significantly boost the return for an income investor. If an investor purchased Realty Income stock at the end of 2006 (not exactly the best time to be in real estate), they would be earning a yield on cost of 9.2% today thanks all the dividend hikes. (Source: “The Magic of Rising Dividends,” Realty Income Corp, last accessed August 30, 2017.)
The reason why this monthly dividend REIT can achieve such impressive payout growth is its rock-solid business. Realty Income invests in freestanding buildings in prime locations and rent them out through long-term leases. Right now, the company’s portfolio contains more than 5,000 properties located in 49 states and Puerto Rico. The lease agreements typically range from 10 to 20 years.
If you are a landlord yourself, you would know that chasing late payments is never a fun experience. Realty Income mitigates this problem by renting its properties to high-quality tenants. The company’s top 20 tenants by annualized rental revenue include well-known names such as Wal-Mart Stores Inc (NYSE:WMT), FedEx Corporation (NYSE:FDX), and Walgreens Boots Alliance Inc (NASDAQ:WBA). By the end of the second quarter of 2017, investment-grade-rated tenants contribute approximately 46% of Realty Income’s annualized rental revenue. (Source: “Top 20 Tenants,” Realty Income Corp, last accessed August 30, 2017.)
The portfolio is well-diversified too. By the end of June, the 5,028 properties in Realty Income’s portfolio are leased to 250 commercial tenants operating in 47 different industries.
With a diversified portfolio, high-quality tenants, and long lease terms, Realty Income is well positioned to generate a steady stream of rental income and distribute some of it to investors. And that’s why it is ranked the number-one monthly dividend REIT for 2017.
#2 EPR Properties
Investors of real estate stocks would know that most of them specialize in a certain type of properties, such as office, retail, industrial, and healthcare. Is it possible for a real estate company to provide investors exposure to more than one property type?
The answer is “yes.”
EPR Properties (NYSE:EPR) is a real estate investment trust headquartered in Kansas City, Missouri. It specializes in three different property types: entertainment, recreation, and education.
In the entertainment segment, the company has investments in 144 megaplex theaters, seven entertainment retail centers, and eight family entertainment centers. These properties total 12.4-million square feet and was 99% leased by the end of the second quarter.
The education segment consists of investments in 67 public charter schools, 59 early education centers, and 14 private schools. They were 99% leased by the end of June.
As for recreation properties, EPR Properties has investments in 26 ski parks, 20 attractions, 27 golf courses, and five other recreation facilities. These properties were 100% leased.
By having a specialized orientation complemented by diversification across and within segments, EPR Properties has built a recurring business. And that business allowed it to pay a steady stream of dividends.
The company currently pays $0.34 of dividends per share every month, giving EPR stock an annual dividend yield of 5.96%.
Jeremy Wilburn/Flickr
EPR Properties have also been raising its payout. From 2010 to today, the company has raised its per-share monthly payout at an average annual rate of approximately seven percent. (Source: “Dividends,” EPR Properties, last accessed August 30, 2017.)
And if you are wondering whether those dividend hikes were a bit too aggressive, a look at the company’s financials should be reassuring. In the first half of this year, EPR Properties generated total revenue of $276.9 million, representing a 17% increase year-over-year. (Source: “EPR Properties Reports Second Quarter 2017 Results,” EPR Properties, August 3, 2017.)
For monthly dividend-paying REITs, a key metric to look for is funds from operations, or FFO. This is because at the end of the day, dividends come from the cash a REIT can generate from its operations. The good news is that EPR Properties’ adjusted FFO per share grew six percent year-over-year in the first half of 2017 to $2.48, which was more than enough to cover its total distribution of $2.04 per share during this period.
Investors looking for a high-yield monthly dividend stock should seriously consider EPR Properties.
Also Read:
The 7 Top Monthly Dividend Stocks for 2017
#3 LTC Properties Inc
The last one on the list of monthly REIT stocks is LTC Properties Inc (NYSE:LTC), a real estate investment trust specializing in seniors housing and healthcare properties. Headquartered in Westlake Village, California, the company invests in assisted living, memory care, post-acute/skilled nursing, and range-of-care properties.
LTC Properties has a monthly dividend rate of $0.19 per share. At the current price, that translates to an annual dividend yield of 4.74%.
The payout has been growing, too. LTC Properties switched from paying quarterly dividends to monthly dividends in April of 2005. Its initial monthly dividend rate was $0.11 per share. Today, the company’s monthly payout is $0.19 per share; that’s a growth of 72.7%. (Source: “Dividends,” LTC Properties Inc, last accessed August 30, 2017.)
Mind you, dividends are not the only thing LTC stock investors have collected over the years. This monthly dividend stock also stands out when it comes to total shareholder return, which includes share price appreciation, dividends, and stock buybacks.
From 2006 to 2016, LTC Properties delivered a total return of 203.8% to shareholders. To give you some perspective, the benchmark S&P 500 Index returned 95.7% during this 10-year period, while the SNL U.S. REIT Equity Index returned 71%. (Source: “Delivering Shareholder Value,” LTC Properties Inc, last accessed August 30, 2017.)
While past performance does not guarantee future results, LTC Properties is well-positioned to continue it excellent track record of shareholder returns. In particular, the company stands to benefit from a major demographic trend: an aging population.
thinkpanama/Flickr
According to the U.S. Census Bureau, the number of Americans aged 65 and over is expected to almost double from 43.1 million in 2012 to 83.7 million in 2050. (Source: “An Aging Nation: The Older Population in the United States,” U.S. Census Bureau, last accessed August 30, 2017.)
This demographic trend could become a major catalyst for this healthcare REIT. When more people enter their golden years, healthcare spending is expected to rise. LTC Properties estimated that the typical age of a resident in seniors housing is likely between 82 and 86. And between 2017 and 2025, the company projects that the number of U.S. citizens aged 82 to 86 would increase by 29%, from 5.1 million to 6.6 million. (Source: “Investor Presentation,” LTC Properties Inc, February 2017.)
In addition, despite being focused on the healthcare sector, LTC Properties is doing a pretty good job diversifying within its segments. The company has investments in 207 properties located in 30 different states. It also works with a number of healthcare operators, limiting its concentration risk.
LTC Properties is not a company that makes headlines very often. But with a solid business, an impressive yield, and major tailwinds coming from a demographic trend, it is one of the top monthly REITs for 2017.
Final Thoughts on Monthly Dividend REITs
Monthly dividend REITs are great for investors living off the returns of their income portfolios. With more frequent distributions, these companies make it a lot easier for investors to match their income and expenses.
However, note that investing in individual REITs is not the only way to earn a steady income from real estate. Investors who want to have a diversified portfolio of real estate stocks may also want to consider exchange-traded funds (ETFs) that specialize in the sector. Our REIT ETF list contains some great income-generating funds, including one that pays monthly dividends.