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3 Monthly Dividend REITs to Buy in December

Dec 15, 2020 by Reuben Gregg Brewer
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Monthly dividends solve the budgeting issues that quarterly dividends can create, which makes monthly pay stocks a great option for retired investors. Although comparatively few companies pay monthly, that doesn't mean you can't find great stocks that do. Here are three monthly pay real estate investment trusts (REITs) that you should have on your radar in December: Realty Income (NYSE: O), Broadmark Realty Capital (NYSE: BRMK), and LTC Properties (NYSE: LTC).

Old reliable

The first name here is one that many dividend investors will know well, Realty Income. It offers a roughly 4.5% yield and has increased its dividend annually for more than a quarter century. The real estate investment trust is what's known as a net lease REIT, which means the lessees of its properties are responsible for most of the operating costs of the assets they occupy. It's generally considered a relatively low-risk investment approach in the sector.

With a portfolio of over 6,500 properties, Realty Income is one of the largest players in the sector and is usually looked at as a bellwether name. It's portfolio is concentrated in the retail space, which accounts for roughly 85% of its rents, but it also has investments in industrial (10% of rents), office (3%), and agricultural (the rest) properties. The coronavirus has helped, once again, show Realty Income's strengths, with the company's occupancy remaining in the high 90% range throughout the pandemic and rent collection rates now back in the low to mid 90% range, after taking an early hit. Moreover, in a sign of strength, the REIT increased its dividend four times in 2020.

The problem with Realty Income is that investors know just how well-run a company it is and the shares usually trade at a premium to peers. However, the yield is roughly in the middle of its 10-year range today, suggesting investors are paying a fair price for a great company. That's probably a good tradeoff for more conservative types.

An odd duck

The next name is a mortgage REIT, which is normally an area that should be left to more aggressive investors. However, Broadmark Realty Capital isn't your typical mREIT. For starters, it's what's known as a hard-money lender, which means it makes short-term loans to builders. More important, however, is the fact that the REIT has a debt-free balance sheet. The company only IPOed about a year ago, so there's no long-term record to go on as a public company, but it has an over decade-long history behind it in the private space. The current yield is a generous 6.9%.

One of the important things here is that Broadmark is a very conservative lender. For example, when making loans, management considers the likely sale price of the completed project and then limits its lending to around 60% of that total. That leaves a lot of room for adversity before Broadmark's investment is at risk. In a worst case scenario, the REIT can take over a project and complete it. To be fair, the pandemic did cause some disruptions to its business early on, as construction projects were delayed. But based on third-quarter results, management believes things are getting back to normal. This no-debt, monthly-pay mortgage REIT is worth the deep dive, even for more conservative types.

The big trend

The last name here is LTC Properties, a healthcare REIT that owns roughly 180 skilled nursing (73) and assisted living (107) properties. Owning senior housing assets hasn't been a great thing during the pandemic, given that the coronavirus spreads easily in group settings and seniors face heightened risks from COVID-19. However, with vaccines working their way to approval, it is worth taking a look at LTC Properties since it touches on the giant and long-term demographic trend of a graying population. It's worth noting that the REIT collected 94% of its rents in the third quarter ,and its funds available for distribution payout ratio was around 80%, so it appears to be weathering the current headwinds reasonably well.

Looking past the coronavirus, with a yield of 5.9%, LTC Properties provides direct access to a very big shift taking place in the economy. In fact, the growth rate of its target demographic, people 80+ years old, is expected to double over the next decade. If that happens, this REIT should see strong demand for its properties and growth opportunities for its portfolio. Jumping in here, despite the negative tint of COVID-19, will let you ride that long-term demographic wave.

Replacing a Paycheck

A monthly dividend provides the closest thing to a paycheck that you can get from a dividend stock, making monthly-pay stocks highly attractive for those entering or in retirement. Realty Income is the safe choice, with a long and successful history behind it. Broadmark Realty Capital is a high-yield option that isn't as risky as it may first appear once you dig into the story. And LTC Properties is muddling through a rough patch, but it appears to be doing so in relative stride for those willing to look past the near-term headwinds to see the long-term opportunity. All three are worth a closer look if you're seeking out a monthly pay REIT.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.