Investing in real estate is one of the many ways to generate passive income. Among the most passive real estate investments is buying shares of a real estate investment trust (REIT). A few top REITs pay monthly dividends, enabling you to generate recurring cash flow to help cover your routine expenses.
Here's how much you'd need to invest in three top monthly dividend stocks to produce over $250 of passive dividend income each month:
|
Dividend Stock |
Investment |
Current Yield |
Annual Dividend Income |
Monthly Dividend Income |
|---|---|---|---|---|
|
Realty Income (O +0.67%) |
$16,666.67 |
4.9% |
$815.00 |
$67.92 |
|
EPR Properties (EPR 0.67%) |
$16,666.67 |
6.1% |
$1,021.67 |
$85.14 |
|
Healthpeak Properties (DOC 0.12%) |
$16,666.67 |
7.2% |
$1,196.67 |
$99.72 |
|
Total |
$50,000.00 |
6.1% |
$3,033.33 |
$252.78 |
Data source: Google Finance and the author's calculations.
For comparison, you'd need to invest over $266,000 in an S&P 500 index fund to generate the same annual income, given its lower yield (around 1.1%).
Here's a closer look at these high-yielding REITs.
Image source: Getty Images.
Realty Income
Realty Income is one of the world's largest REITs by market cap. It holds a diversified portfolio of retail, industrial, gaming, data centers, and other properties secured by long-term, net leases with many of the world's leading companies. Net lease real estate generates very stable rental income because tenants cover all property operating costs, including routine maintenance, real estate taxes, and building insurance.
The REIT pays out about 75% of its stable income in dividends each month, retaining the rest to invest in growing its portfolio of income-producing properties. Realty Income also has one of the best balance sheets in the REIT sector, giving it additional financial flexibility to continue growing its portfolio.
NYSE: O
Key Data Points
Realty Income's growing portfolio has enabled it to steadily increase its dividend. The REIT has raised its payout for more than 31 straight years, including the last 113 quarters in a row.
EPR Properties
EPR Properties focuses on investing in experiential real estate (e.g., movie theaters, eat-and-play venues, and attractions). It net leases these properties to operating tenants.
NYSE: EPR
Key Data Points
The REIT pays out about 70% of its stable cash flow in dividends, retaining the rest to invest in additional income-generating experiential real estate. EPR Properties also routinely sells lower-quality properties and redeploys capital into new properties that upgrade its portfolio. For example, it sold $139 million of properties through the third quarter of last year, including vacant theaters and a land parcel. That gave it the funds to invest $113 million to buy a portfolio of golf courses and a water park.
EPR Properties' growing portfolio supports its rising dividend. The REIT raised its monthly dividend by 3.5% early last year.
Healthpeak Properties
Healthpeak Properties is a healthcare REIT with investments in outpatient medical, lab, and senior housing properties. The REIT leases its properties to high-quality health systems and biopharma companies.
NYSE: DOC
Key Data Points
The healthcare REIT is currently undergoing a major portfolio revamp. It's forming a new dedicated senior housing REIT (Janus Living) that it plans to take public. That will enable it to unlock the value of its senior housing properties and grow this portfolio. Additionally, Healthpeak is capitalizing on the strong demand for outpatient medical properties by selling off some of its portfolio. That will give it the funds to invest in outpatient medical development projects and buy more lab properties.
Healthpeak Properties expects to maintain its current monthly dividend while it capitalizes on opportunities to upgrade its portfolio. New investments, including the recent $600 million purchase of an underutilized lab property, should help grow its rental income in the coming years as new investments stabilize. That should enable Healthpeak Properties to resume growing its monthly dividend in the future (it gave investors a 1.7% raise last year when it switched from quarterly to monthly dividend payments).
Ideal real estate income investments
Investing in REITs is a great way to make passive income from real estate. Investing $50,000 into Realty Income, EPR Properties, and Healthpeak Properties could produce over $250 of passive dividend income each month. That's a lot less money than you'd need to invest in many alternatives to generate the same amount of monthly income.
