Many long-term investors let their portfolios grow over time without ever tapping into them along the way. But for those who need the income that a good investment portfolio can provide, dividend stocks make a great choice, because they regularly pay out money that you can use to cover your immediate cash needs.
However, most dividend stocks pay shareholders only once every three months. That doesn't match up with the regular income needs most people have. However, a handful of solid dividend stocks make monthly dividend payments. Among the best prospects in that select group are EPR Properties (EPR 0.33%) and Realty Income (O 0.59%), both of which we'll look at in greater detail below.
A spin on the typical real estate investment
Real estate is a great investment for those seeking monthly income, because the business model of the real estate industry matches up well with that time frame. Those who lease properties are used to making monthly rent payments, and many of the companies that own and manage those properties are in a position to then turn around and pay out the rental income they've received as dividends. Real estate investment trusts are a convenient way for investors to put money into real estate, as REITs get valuable tax advantages and have rules that require them to pay out almost all of their income to their shareholders in the form of dividend payments.
EPR Properties is a REIT, but it's not a typical one. Rather than investing in standard projects like office buildings, retail space, or multifamily housing, EPR specializes in several niche segments of the real estate industry. Among its nearly 400 properties, you'll find a host of entertainment venues, recreational facilities, and educational institutions in EPR's portfolio, with a total of $6.7 billion invested across those areas. More than 250 tenants call EPR their landlord, spanning most of the U.S. and Canada.
Movie megaplexes make up a huge portion of EPR's portfolio, but you'll also find a diverse set of other properties ranging from golf entertainment complexes and ski resort areas to public and private schools and early childhood education centers. These properties have been resilient in their capacity to keep making rental payments on time, benefiting EPR's shareholders.
For investors, EPR has been a lucrative investment. Not only has EPR made consistent dividend payments, but they've also grown over time. Annual increases of around 5% to 8% per year have lifted per-share payouts from $2.60 in 2010 to $4.32 in 2018, giving shareholders an attractive dividend yield of around 6.7%. With a portfolio whose properties appeal to key demographic groups like millennials seeking entertainment and educational opportunities, EPR's monthly dividend payouts are just part of what makes the REIT an intriguing choice for investors.
Check out the latest EPR Properties earnings call transcript.
The original monthly dividend company
Realty Income has a long and well-earned reputation for being appealing to those seeking monthly income from their portfolios. In fact, this REIT has made monthly dividends a mark of distinction, styling itself as "The Monthly Dividend Company" and touting its long history of success. For nearly 50 years, Realty Income has made consecutive monthly dividend payments, and over the past 21 years, the REIT has boosted those payouts every single quarter. The company's 4.2% dividend yield isn't huge in the real estate world, but average annual total returns of almost 16% dating back to 1994 make Realty Income a top performer in the space over the long run.
Realty Income focuses primarily on retail space, with more than 5,600 properties under lease serving 260 commercial tenants in nearly every state across the U.S. market. With a focus on high-need areas like drugstores, convenience stores, dollar stores, and fitness centers, Realty Income's portfolio doesn't raise the same concerns that other REITs face when they rent out the bulk of their property to big-box department-store retailers that are currently going through tough times.
As with most REITs, Realty Income faces the possible challenges of rising interest rates and potential future recessionary economic conditions that could make it tougher for tenants to stay in their leased locations. However, Realty Income's focus on recession-resistant segments of the retail space makes those adverse events less likely to occur. Income investors have benefited from the REIT's conservative approach for years, and they're likely to continue to do so in 2019 and beyond.
Check out the latest Realty Income earnings call transcript.
Get the money you need
If your budget has you looking for income to cover your monthly expenses, then these two monthly dividend payers can be a good fit for your investment portfolio. Between current income and future growth prospects, both Realty Income and EPR Properties are attractive and show promise for the future.