Most companies make quarterly dividend payments. That makes it more challenging to match that passive income with recurring expenses. Investors must find dividend stocks on different quarterly cycles to align income with expenses.

Monthly dividend stocks can solve this dilemma. Among that group, EPR Properties (EPR 1.46%) stands out for its big-time dividend. The specialty REIT currently yields 7.9%. That's several times above the S&P 500's 1.6% dividend yield and almost double the average REIT. 

Built on a solid foundation

EPR Properties focuses on owning experiential real estate. These properties include theaters, eat & play venues, attractions, ski resorts, fitness & wellness properties, experiential lodging, gaming properties, and cultural venues. The company also has a small portfolio of educational properties, including early childhood locations and private schools. The company has invested over $6.7 billion into 363 properties across 44 states and Canada. About 93% of its sites are experiential, while the rest are educational.

The REIT leases these properties to over 200 tenants that operate the locations. It utilizes triple net leases (NNN), making the tenant responsible for maintenance, building insurance, and real estate taxes. Meanwhile, most leases contain escalation clauses that raise rents at a fixed rate annually or every five years. Those leases enable the company to generate relatively stable rental income that steadily rises.

EPR Properties pays out a reasonable portion of its steady income in dividends. In the first quarter, it generated $1.30 per share of adjusted funds from operations (FFO). That covered its total dividend outlay of $0.825 per share ($0.275 per share each month) with room to spare. 

The company further stabilizes its dividend with a solid investment-grade balance sheet. It primarily uses fixed-rate debt and has a weighted average maturity of five years. The company also has a low leverage ratio and lots of liquidity. EPR ended the first quarter with nearly $100 million of cash on its balance sheet and an undrawn $1 billion credit facility.

Room to grow

EPR Properties pressed pause on paying dividends during the pandemic to preserve cash. That enabled it to emerge from that challenging period with an even stronger financial profile. The REIT reinstated its dividend in 2021 and increased it by 10% in early 2022. 

The company could continue to increase its payout in the future. It's currently being more conservative and retaining additional cash because one of its largest tenants, Regal Entertainment Group's parent Cineworld Group, filed for Chapter 11 Bankruptcy last September. That company has continued paying rent. Further, it recently announced a plan to exit bankruptcy by the middle of this year. However, it's unclear how the proceedings will impact rent collection, lease rates, and amounts still owed from the pandemic. 

EPR Properties has been working to reduce its exposure to the theater industry by diversifying into other experiential property types. The company plans to invest $200 million to $300 million on new property investments this year, which it will fund with cash on hand, post-dividend free cash flow, and borrowings under its credit facility. The REIT spent $46.7 million to buy a fitness and wellness property during the first quarter. It's also investing $245 million over the next two years ($132 million in 2023) on experiential development and redevelopment projects. 

These investments should increase the company's income over the coming years. That should give it more money to pay dividends, assuming a positive outcome from the Cineworld bankruptcy. In the meantime, the REIT's low dividend payout ratio and rock-solid balance sheet put its ultra-high-yielding dividend on a firm foundation.

Attractive monthly income

EPR Properties pays a big-time monthly dividend. Every $1,000 invested in the REIT can generate $6.58 per month of dividend income ($79 per year). That's nearly double the rate of many other monthly dividend stocks. It's an attractive option for investors seeking recurring passive income to help cover their routine expenses.