Buying dividend stocks can be a great way to produce some extra income to help cover your living expenses. However, some investors face a problem. Most companies pay quarterly dividends, which don't align with monthly costs.
Stag Industrial (STAG -0.53%), EPR Properties (EPR 0.81%), and Healthpeak Properties (DOC 0.33%) stand out because they pay monthly dividends. The real estate investment trusts (REITs) also have higher dividend yields. These features make them ideal stocks to buy for passive income.
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A steady grower
Stag Industrial currently has a 4.3% dividend yield, more than three times the S&P 500's dividend yield (1.3%). Every $100 invested in its stock would produce $4.30 in annual dividend income at that rate.
The REIT owns a diversified portfolio of industrial real estate (warehouses and light manufacturing facilities) secured by long-term leases that escalate rents at a low-single-digit annual rate. It pays out about 67% of its cash flow in dividends, enabling it to retain over $100 million each year to fund new income-generating industrial property investments.
The company also has a conservative balance sheet, giving it additional financial flexibility to invest in expanding its portfolio. It targets value-add opportunities that generate higher returns, such as leveraging its expertise to lease up a vacant property and completing expansion and redevelopment projects at an acquired location.
Stag Industrial's growth drivers have enabled it to steadily increase its monthly dividend. The REIT has raised its payout every year since it went public in 2011.
An entertaining income stream
EPR Properties' monthly dividend currently yields 6.8%. This REIT focuses on owning experiential real estate, such as movie theaters, eat-and-play venues, health and fitness properties, and attractions. It leases these properties to companies that operate the experiences.
The REIT pays out about 70% of its stable rental revenue in dividends, enabling it to retain cash to fund new investments. It has the financial flexibility to invest about $200 million to $300 million annually. This investment rate supports about 3% to 4% annual growth in the company's funds from operations (FFO) as adjusted. That should support a similar dividend growth rate (EPR hiked its payout by 3.5% earlier this year).
EPR Properties will acquire experiential properties (it bought an attraction property in New Jersey for $14.3 million in the first quarter) and invest in development and redevelopment projects. It currently has about $148 million in projects underway that it expects to fund over the next two years to support its growing dividend.
A healthy payout
Healthpeak Properties currently has a 7.2% dividend yield. The healthcare REIT owns outpatient medical buildings leased to leading healthcare systems, lab properties leased to life science companies, and senior housing properties rented out to seniors. This diversified portfolio produces stable, growing rental income.
The REIT produces more than enough rental income to cover its high-yielding monthly dividend, giving it some additional cash to invest in new healthcare properties. Healthpeak also has a strong balance sheet with lots of available capacity. The company estimates it has $500 million to $1 billion of dry powder to make accretive investments or repurchase shares.
Healthpeak committed to investing $161 million over the past few months into real estate-backed loans and a preferred equity investment in a lab property. These investments will generate income to support its dividend, which the REIT recently increased by 2%. With ample financial flexibility to grow, Healthpeak should be able to continue raising its dividend.
High-quality, high-yielding monthly dividend stocks
Stag Industrial, EPR Properties, and Healthpeak Properties own high-quality real estate portfolios that produce stable, growing rental income. That gives them money to pay lucrative monthly dividends and invest in growing their portfolios, making them ideal stocks to buy for passive income.
