Out of the more than 5,500 stocks listed on the Nasdaq and NYSE, about 2,500 pay dividend yields of 1% or greater. Of these, the vast majority pay quarterly dividends.
However, for investors who want a more frequent income stream, there are several good options that pay monthly. Five of them can be found in the real estate sector, and each of these equity REITs pays a dividend yield greater than 4% on a monthly basis. Here's a quick look.
|
Company |
Property Type |
Dividend Yield |
|---|---|---|
|
Realty Income (O +0.23%) |
Retail (freestanding) |
4.2% |
|
Apple Hospitality REIT (APLE +2.47%) |
Hotels |
5.9% |
|
EPR Properties (EPR +0.83%) |
Diversified |
5.4% |
|
LTC Properties (LTC +0.13%) |
Healthcare |
4.9% |
|
Stag Industrial (STAG +0.93%) |
Industrial |
5.8% |
Dividend yields are current as of Feb. 17, 2017. As of this writing, these were the only five REITs with market capitalizations of $1 billion or greater that were actively paying monthly dividends.
1. Realty Income
Realty Income is a company I write about frequently, and is a cornerstone of my own portfolio. The largest company on this list by a wide margin, Realty Income actually has a trademark on the nickname "The Monthly Dividend Company."
In a nutshell, Realty Income's primary focus is net-leased, freestanding retail real estate. The business model is designed to produce dependable, growing income, which the company has successfully done for nearly half a century. Tenants sign long-term leases, minimizing turnover and vacancy risk, and are mostly engaged in businesses that are recession- or competition-resistant or both.
As of this writing, Realty Income has made 559 consecutive monthly dividend payments and has grown its dividend at a 4.7% annualized rate since its 1994 NYSE listing. What's more, during that period, the company has generated total returns averaging 16.9% per year.
Image source: Getty Images.
2. Apple Hospitality REIT
Apple Hospitality REIT invests in hotel properties operating under various Hilton and Marriott brand names. The company's simple but effective strategy of building a diverse and desirable hotel portfolio has resulted in one of the best profit margins of its peer group. Additionally, most of the third-party managers that operate Apple Hospitality's hotels have their fees tied to the hotel's performance, so there's a major incentive for them to maximize profitability.
As I wrote in another article, one key advantage is that hotels have the unique ability to adjust their rental rates on a daily basis, which allows them to adapt to current financial climates quicker than, say, apartment owners.
3. EPR Properties
Unlike the four other REITs on this list, EPR Properties doesn't invest in just one type of real estate. Instead, the company's portfolio is made up of three distinct types of commercial real estate: entertainment, recreation, and education.
The entertainment properties include megaplex movie theaters, which have been growing revenue rapidly in recent years, and family entertainment complexes. The company also has a growing recreation segment, including such property types as ski parks, waterparks, and golf complexes. Finally, EPR's education properties include public charter schools, early childhood education facilities, and private schools. The demand for public charter schools is growing much faster than supply, so this could be an attractive growth opportunity going forward.
Image source: Getty Images.
4. LTC Properties
I've written about several healthcare REITs as excellent long-term investments and I own a few of them, such as industry giant Welltower. And a great way to invest in healthcare real estate if you want monthly dividends is with LTC Properties.
Why healthcare real estate? For starters, it's a defensive type of real estate. In tough economic times, people can stop going to the mall or live with roommates instead of getting their own apartments. They can't just give up healthcare.
Additionally, the demographics point toward decades of expansion for the healthcare industry, particularly the types of properties that cater to senior citizens. Specifically, the 75-and-older population is expected to roughly double by 2035, which will create the need for long-term care properties (what the "LTC" in LTC Properties stands for) such as senior housing and assisted living.
5. Stag Industrial
Industrial properties have relatively low operating expenses and strong tenant retention. Stag Industrial owns more than 44 million rentable square feet of space, despite being a relatively new REIT. The portfolio is well diversified, with only one tenant making up more than 2% of the rental income.
Industrial real estate is a highly fragmented subsector of real estate. Stag estimates its target market at about $250 billion in size, of which it has just a 1% market share, leaving lots of room for expansion. As Stag put it in a 2016 investor presentation, the company is bringing an institutional approach to a non-institutional market, which should prove to be a nice competitive advantage going forward.
