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3 Monthly Dividend REITs to Buy in August


Aug 11, 2020 by Matthew DiLallo

There aren't too many companies that pay a monthly dividend because most opt for quarterly payouts. Meanwhile, the one sector where monthly payouts are more common -- REITs -- has been hit hard by the deep downturn in the real estate market this year, causing many of those offering such dividends to suspend them temporarily.

However, a few high-quality monthly payouts remain for those investors who desire a recurring income stream to match their expenses. Three that stand out this August are Realty Income (NYSE: O), Gladstone Land (NASDAQ: LAND), and LTC Properties (NYSE: LTC).

The monthly dividend company

Any discussion on top monthly dividend stocks should start with Realty Income, which calls itself "the monthly dividend company." The REIT has a fantastic dividend track record. It recently declared its 601st consecutive monthly dividend. The company has also increased its payout 107 times since going public in 1994 -- including in each of the last 91 straight quarters -- growing it at a 4.5% compound annual rate during that time frame.

Realty Income's current dividend -- which yields 4.5% -- is on a rock-solid foundation. It has one of the highest credit ratings in the REIT sector and a reasonably conservative dividend payout ratio of 81.5% of its FFO during the most recent quarter despite all the turbulence in the real estate sector. While 84% of its rent comes from retail properties -- which were hit hard by COVID-19 related shutdowns -- it was able to collect 86.5% of its rent during the second quarter, which shows the quality of its portfolio. Meanwhile, the REIT has lots of liquidity, which will enable it to take advantage of the downturn to buy more cash-flowing properties to support future dividend growth. Add it all up, and it's one of the best REITs to buy for monthly income.

Growing a monthly income stream

Gladstone Land is a specialty REIT focused on farmland. It currently owns 115 farms that it leases to tenants that primarily grow fresh produce, like fruits and vegetables.

Gladstone Land has paid a dividend for 90 consecutive months, which covers its entire life as a public company. The REIT has increased its dividend 19 times over the last 22 quarters, growing it by 49.3% during that time frame. It aims to keep growing its payout --- which currently yields 3.4% -- at a rate that outpaces inflation in the future.

Driving dividend growth will be the company's ability to continue acquiring new farms and renewing leases on existing ones as they expire at higher rates. It bought two more farms during the second quarter and has plenty of financial flexibility to continue purchasing new ones that meet its investment criteria. Because of that, it should be able to keep paying investors a steadily growing monthly dividend.

A healthy yield paid monthly

Healthcare REIT LTC Properties owns senior housing and skilled nursing properties. The company has been paying its investors monthly since it switched over from quarterly payments in 2005. It has steadily increased its payout over the years, though it hasn't given its investors a raise since late 2016. At the current rate, LTC Properties' dividend yields around 6%.

LTC Properties hasn't increased its dividend in quite a while because its payout ratio is a bit on the high side at 86.7% of its FFO over the past year. However, the company is very comfortable with its dividend payout ratio, thanks to its strong balance sheet. Leverage was 4.3 times debt-to-EBITDA at the end of the second quarter, comfortably below its 5.0 times target. Because of that, the payout isn't at risk of a reduction despite the impact COVID-19 has had on senior housing this year.

Solid monthly income streams

Realty Income, Gladstone Land, and LTC Properties all have long histories of paying monthly dividends. That should continue since this trio has solid balance sheets, which enabled them to weather this year's storm in the REIT market. Because of that, they're all solid choices for investors seeking a monthly income stream.

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Matthew DiLallo 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.