Most recurring expenses, like rent and utility bills, come monthly. And most people need income flowing in each month to help cover these regular costs.
While dividend-paying stocks can supply passive income, the majority of companies that pay dividends do so quarterly. However, some pay monthly dividends. LTC Properties (LTC 1.18%), AGNC Investment (AGNC 0.97%), and EPR Properties (EPR -0.32%) stand out to a few Fool.com contributors for their attractive payouts. They pay monthly dividends with well above average yields. That makes them great for those seeing regular passive income.
This healthcare REIT hasn't missed a monthly payout in decades
Marc Rapport (LTC Properties): LTC Properties is a real estate investment trust (REIT) that has produced a reliable record of dividend income in a growing business based on a reliably aging population.
The company currently has a portfolio of 213 properties operated by 29 different partners in 29 states, roughly split evenly between senior housing and skilled nursing properties.
The need for such long-term options puts this healthcare stock in a good position to continue building on a record of nonstop monthly dividend payments dating back nearly 20 years, including not missing or reducing a payment during the pandemic, when its tenants were particularly hard hit. The agility it showed by selling assets and changing operators points to management's continued ability to respond to the challenges and opportunities it will face next.
Meanwhile, the payout has been $0.19 per share since late 2016, which month after month has produced a yield of generally between about 4% and the current 7% over those seven years.
While it would be nice to see more dividend growth in its immediate past, a payout ratio of only 65% based on cash flow, a growing portfolio and a solid balance sheet points to that possibility, should management decide to do that.
In the meantime, LTC Properties is a good choice for retirees and other income investors looking for a reliable source of passive income from real estate.
The clouds are parting for the mortgage REITs
Brent Nyitray (AGNC Investment): AGNC Investment is a mortgage REIT that invests primarily in mortgage-backed securities guaranteed by the U.S. government. If you recently bought a home using a loan guaranteed by Fannie Mae or Freddie Mac, it probably ended up in a mortgage-backed security similar to the ones held by AGNC Investment. These loans have no credit risk, which means that even if the borrower defaults on the mortgage, AGNC Investment still gets its principal and interest payments on time and in full.
The past 18 months have been awful for the mortgage industry as the Federal Reserve has raised interest rates to defeat inflation. As rates increase, the value of mortgage-backed securities fall, and this has been the story for mortgage REITs. These REITs do hedge against interest-rate risk, but mortgage-backed securities have fallen in value more than REITs made on their hedges, which is why most mortgage REITs have seen declines in book value per share and have been forced to cut their dividends.
The underperformance has been a function of increased interest-rate volatility because of the Fed's rate increases. The Fed appears to be at the end of its cycle, and this underperformance should reverse. AGNC Investment pays a monthly dividend of $0.12 per share, which gives the company a dividend yield of 14.8%. On the second-quarter earnings conference call, AGNC Investment's president and CEO, Peter Federico, said the company sees mid- to high-teens returns on its investment portfolio, which means the dividend should be sustainable. Investors looking for income and believe the U.S. economy is entering into a slowdown will probably find AGNC Investment attractive.
A blockbuster dividend
Matt DiLallo (EPR Properties): EPR Properties owns a growing collection of experiential real estate, such as theaters, eat-and-play venues, and attractions that it leases back to operating companies. Those contracts supply it with fairly predictable rental income. It returns a majority of that cash flow to investors via a monthly dividend that currently yields 7.4%.
Some of the REIT's tenants, particularly in the theater industry, faced financial troubles because of the pandemic. However, it has worked with them by deferring rent and restructuring leases. With the sector now on the mend, driven by recent blockbuster releases, its tenants are in a much better position to pay rent, including deferred amounts.
Meanwhile, EPR Properties continues to grow and diversify its portfolio by acquiring and developing additional experiential real estate. The company has spent nearly $100 million this year to acquire a fitness and wellness property and on build-to-suit development and redevelopment projects. That has it nearly halfway to the low end of its goal to complete $200 million to $300 million of investment spending this year. It has already lined up $224 million of additional experiential development and redevelopment projects it expects to fund over the next two years. Thanks to its post-dividend free cash flows and strong liquidity, the company has plenty of financial capacity to support this investment level.
Future investments will help grow EPR's rental income, putting its dividend on an even more sustainable level. That growth could also eventually enable the REIT to increase its already high-yielding dividend.
