There's a big switch in retirement from building a nest egg to living off of it, which often leads investors toward dividend-paying stocks. Most dividends, however, are paid quarterly, which is a bit of a quagmire for investors that need that cash at shorter intervals. But some companies, like Realty Income (O 0.28%) and EPR Properties (EPR -0.42%), pay monthly, making it much easier to create a family budget.

Here's how these two companies are similar and how they are very different, too. If you are looking for a monthly-pay dividend stock, at least one will likely tickle your fancy.

Real estate can produce nice periodic income

Realty Income and EPR are both real estate investment trusts (REITs). This is a business structure specifically designed to pass income on to shareholders, as it allows a company to avoid corporate-level taxes. This increases the cash that investors collect, but with the side effect that the dividend is treated as regular income by the shareholder. You can avoid that taxation issue by owning these securities in a Roth account, so there's a workaround for savvy investors here.

A piggy bank with stacks of money and a hand putting water on them showing growth.

Image source: Getty Images.

In addition to being REITs, both Realty Income and EPR make use of net leases. This means that they own the properties, but their lessees (generally a single tenant per property) are responsible for most of the operating costs of the buildings they occupy. This protects both of these REITs to some degree from the impact of rising maintenance costs and taxes, among other things. Although any single property is high risk given there's just one tenant, across a large enough portfolio the risk is pretty low.

Realty Income is easily the biggest name in the net-lease space with a portfolio of more than 12,200 properties. It also sports a huge $40 billion market cap. Meanwhile, EPR's portfolio includes just 363 properties, and it has a market cap of $2.8 billion. There are some other important differences between these two REITs that investors need to understand. 

Low risk...

Realty Income has trademarked the nickname "The Monthly Dividend Company." Everything about the business is designed to ensure it can keep paying a reliable dividend, and the payment has been increased annually for a huge 28 years and counting. The dividend yield today is a relatively attractive 4.8%, which is toward the high side of the company's yield range over the past decade. It is also well above what you'd get from an S&P 500 Index ETF (1.6%) and the average REIT (3.7%), using Vanguard Real Estate Index ETF as a proxy.

Its portfolio is heavily focused on retail properties (around 75% of rents). These assets are fairly generic, making them easy to buy and sell, or re-tenant if need be. The rest of its portfolio is invested in industrial properties and a couple of niche sectors (agriculture and a casino). It also has some geographic diversification, with roughly 10% of rents coming from Europe. Add in an investment-grade-rated balance sheet, and even the most conservative investor will probably like what they see here.

...and high risk

One of the reasons why EPR's portfolio is so much smaller is because it owns experiential properties, a list that includes large and highly specific things like amusement parks, ski resorts, and water parks. These are mission-critical properties that wouldn't be easy to buy, sell, or re-tenant. However, the lessees aren't able to move easily either. So there are two sides to the story on that front. That said, experiential properties are largely designed to bring people together in groups, which was a bad thing in 2020 when the coronavirus pandemic started to spread. EPR ended up suspending its dividend, and when it was brought back it was at a lower level. 

The dividend has been increased once since being reinstated. The huge 10% hike suggests that the worst is over for EPR, and the adjusted funds from operations (FFO) payout ratio in the fourth quarter of 2022 was a conservative 65% or so. There's a lot of room for adversity in the payout ratio

That's a good thing, because around 40% of EPR's rents come from movie theaters. This is an industry that's still struggling to recover from the pandemic hit. And this exposure is largely why the REIT's yield is a huge 8.6%. It's basically the other side of the spectrum from Realty Income risk-wise and yield-wise. While not a good choice for conservative investors, given the improving business environment and modest payout ratio, more aggressive types might want to grab the high yield despite the much higher level of risk.

Two options

No investment is perfect and both Realty Income and EPR come with trade-offs. Realty Income is slow and boring, but that has also translated into a reliable monthly dividend stream. EPR is focused and higher risk, noting the dividend cut, but fear about the risk has resulted in a very high yield. As the pandemic has moved further into the past, EPR's business continues to look stronger and stronger. Not for the faint of heart, it could still be a good high-yield monthly pay option for the right type of investor.