3 Top REITs That Pay Monthly Dividends

By: , Contributor

Published on: Aug 22, 2019 | Updated on: Dec 12, 2019

Looking for a real estate investment trust that pays monthly dividends? These three REITs should be on your list.

The vast majority of dividend stocks pay shareholders once per quarter. That’s true of most real estate investment trusts (REITs) as well. But a handful of REITs reward their investors every month. Depending on your financial needs and goals, getting paid monthly can be preferable. This is true whether you’re looking for income or to reinvest that cash as quickly as you get it.

But which monthly dividend REITs should investors pay the most attention to? There are quite a few to choose from across different real estate specialties. They also have different long-term goals.

Let’s take a closer look at three in particular that stand out as high-quality REITs worth owning. While they’re not particularly cheap at recent valuations -- and one is actually a bit pricey -- all three should be on dividend investors’ watch lists.

3 top monthly dividend REITs

Company Name Dividend Yield Monthly dividend amount
LTC Properties (NYSE:LTC) 4.6% $0.19
Realty Income (NYSE:O) 3.6% $0.226
STAG Industrial (NYSE:STAG) 4.9% $0.119

As of 9/9/2019.

Keep reading for a closer look at what makes them worth buying now and holding for the long term.

A huge demographic shift you can profit from

LTC Properties is well-positioned to take advantage of the demographic changes happening in the U.S.

At its peak, the baby boomer generation was the biggest in American history. Neither Generation X nor millennials have surpassed the number of boomers.

With boomers now entering their golden years, the number of older Americans is starting to skyrocket. According to the U.S. Department of Health & Human Services,10,000 Americans turn 65 every day. That demographic shift is set to continue for at least the next decade.

Between 2015 and 2029, the number of Americans over 65 is expected to double from 40 million to 80 million. The 85-plus population will also double. Without a doubt, this demographic will be the fastest-growing segment of the U.S. population over the next decade.

Between 2015 and 2029, the number of Americans over 65 is expected to double from 40 million to 80 million. The 85-plus population will also double. Without a doubt, this demographic will be the fastest-growing segment of the U.S. population over the next decade.

This aging trend represents a great opportunity for LTC Properties. This REIT specializes in senior housing and skilled nursing properties. It owns or has a financial interest in over 200 properties or projects under development in 28 states.

Based on demographic trends, senior housing is set to be a major area of need in the years ahead. LTC Properties looks to be a major player. It’s not particularly cheap today, trading for 14.7 times 2018 funds from operations. But it’s a fair valuation and the 5.1% dividend yield creates a lot of value in its own right.

The combination of above-average yield, reasonable valuation, and solid long-term prospects make LTC Properties a monthly dividend REIT worth owning.

A monthly dividend giant

With revenues of $1.33 billion in 2018 and a market capitalization of $21.3 billion, Realty Income is a behemoth amongst monthly dividend REITs. It’s also proven a stalwart, having issued a payout in 585 straight months. It's increased the payout an incredible 101 times since its 1994 listing on the New York Stock Exchange.

Realty Income has a huge portfolio of 5,700 properties in nearly every state, Puerto Rico, and the United Kingdom. This REIT should continue to prove a valuable source of dividends.

There's some concern that its holdings rely too heavily on retail, particularly in the face of the e-commerce explosion. And if you go solely on the overall measure -- 82% of its rental revenue comes from retail properties -- you might mistakenly reach the same assumption. But take a closer look at the mix of its properties and you'll see there’s less reason for concern.

For instance, some of the weakest segments of retail, such as apparel, consumer electronics, general merchandise, and sporting goods stores, make up only 3.5% of its rental revenues. High-demand and e-commerce–resistant businesses like automotive parts and service, convenience stores, dollar stores, grocery, health and fitness, and restaurants make up almost 45% of its rent mix. The big takeaway is its property holdings may have some weak spots, but it should continue to provide reliable and steady cash.

At 21 times adjusted 2018 funds from operations, Realty Income isn’t cheap. And its 3.9% dividend yield is on the lower end of the scale for a REIT. It trades for this premium valuation largely because the market is convinced of its safety as a monthly dividend REIT investors can count on.

Because of the valuation, Realty Income may be better to put on your watch list than to buy today. But it’s a high-quality business worth keeping an eye on. At the right valuation and dividend yield, it’s certainly worth owning.

An overlooked way to profit from the e-commerce trend

STAG Industrial may not sound like a savvy bet on the changing retail landscape, but it’s an ideal investment in the future of retail.

STAG’s core business is owning large warehouses and distribution centers, which it leases to single-tenant customers. Demand for these kinds of properties is set to grow for many years. Sellers are shifting from a store-focused model to more distribution centers.

As online competition heats up, a seller’s ability to quickly fulfill an order requires warehouses located close to its customers. Fortunately for investors and companies like STAG, much of the distribution center placement over the past few decades has been farther from population centers. The goal was to maximize their ability to serve retail stores, not customers directly.

That’s going to have to change. E-commerce is expected to grow from 10% of retail sales last year to 23% by 2025. It’s going to take a lot of fulfillment centers to meet that growth and support continued growth thereafter. STAG estimates that the part of the market it's focused on is worth $250 billion. At last count, the company controlled about 1% of that market. In other words, there’s a substantial opportunity for growth, even within this relative niche of the industrial real estate world.

STAG shares trade for about 16 times 2018 funds from operations. This valuation is probably a fair value considering its prospects and quality. But its nearly 5% dividend yield gives it a sizable head-start on delivering double-digit total annualized returns to investors looking for long-term opportunities.

Something to keep in mind

The three REITs above are excellent choices and getting a monthly payout is nice. That’s particularly true if it’s fast income you’re looking for.

But at the same time, don’t get too caught up in chasing 12 checks if it causes you to ignore other REITs. Plenty of quarterly-paying REITs could be better picks for your portfolio.

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Jason Hall has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Stag Industrial. The Motley Fool has a disclosure policy.