Any investor who looks to generate income from their portfolio has no doubt taking a look at real estate investment trusts, or REITs.
A REIT is a company that manages and operates a portfolio of different properties. These properties could include apartment buildings, office complexes, commercial properties, hospitals, shopping malls or hotels, although individual REITs tend to specialize in one specific type of property. REITs hold great appeal because they must pay out at least 90% of their income in the form of dividends to their shareholders, resulting in some REITs offering yields of 10% or more.
For investors looking to generate monthly income, things get a little trickier. Most of them distribute dividends on a quarterly basis. There are a few that pay monthly dividends, and even fewer still that are worth owning. Monthly payers provide a greater deal of flexibility, especially those that use portfolio income to pay their bills, so these deserve special consideration when crafting a larger portfolio.
Dividend.com routinely develops new and innovative tools to help investors execute on top dividend-paying stocks. This led to the development of the Most Watched Stocks List, which provides a ranking of premium members’ preferred equities. Learn about the list and how it can help you by reading the following informative article.
How to Use the Dividend.com Dividend Stock Screener
The Dividend Stock Screener on Dividend.com is a great way to identify stocks and REITs that meet your criteria for income-producing securities. You can screen stocks based on industry, size, yield, payout ratio and dividend history. The tool makes it easy to identify stocks at possible risk of a dividend cut because their payout ratios exceed 100% or stocks with specific ex-dividend dates – a feature that could be most useful for people employing a dividend capture strategy. In fact, this screen was used to identify the list of REITs that pay monthly dividends, some of the top ones of which you’ll find highlighted below.
For a list of all stocks, including some REITs, that have increased their dividend payments for at least 25 consecutive years, click here.
1. Realty Income Corporation (O )
Realty Income focuses on commercial properties, and currently owns roughly 5,000 of them with tenants, such as CVS Health (CVS ) and 7-Eleven. The company launched back in 1969, and shortly thereafter purchased its first commercial property, a Taco Bell restaurant. Realty Income focuses on properties with strong long-term growth potential, and prefers low-cost financing options, such as debt or stock issues over mortgages. It also insists on triple-net leases, arrangements that put the burden of taxes, insurance and maintenance on the tenant.
Why does Realty Income appear first on this list? Well, it’s official tagline reads as “The Monthly Dividend Company.”
2. Chatham Lodging Trust (CLDT )
Chatham Lodging Trust manages nearly 40 premium brand hotels, including brands such as Hilton Garden Inn, Hyatt Place and Residence Inn, across 15 U.S. states. Chatham looks to take advantage of properties where demand currently outpaces supply, paying particularly close attention to those that might be undercapitalized. Chatham does more than just own hotels. It also takes an active management approach by rebranding, revitalizing or redeveloping properties that add value for both the hotel and shareholders.
3. EPR Properties (EPR )
EPR Properties specializes in education and entertainment-related venues, such as charter schools, movie theaters, water parks, ski resorts and golf courses. EPR focuses on what it calls its “Five-Star Investment Criteria,” which looks at value, opportunity, execution, economics and position. To summarize, EPR looks for properties with a sustained competitive advantage, that can obtain a market-dominant position and can deliver an immediate return on investment. EPR switched from a quarterly payment schedule to a monthly one in 2013, and has continued to do so ever since.
For a list of all monthly dividend-paying stocks, click here.
4. LTC Properties Inc. (LTC )
LTC Properties manages more than 200 different healthcare facilities focused on senior care. These include skilled nursing centers, assisted living communities and memory care facilities. According to its most recent quarterly report, LTC looks for five characteristics in a potential property – strong cash flows that produce an annual yield of 7-9%, experienced operators, defendable market positions, quality building structures and a favorable regulatory environment. Since its launch in 1992, LTC has a presence in over half the country, and continues to expand.
5. Stag Industrial (STAG )
Stag Industrial is a REIT focused on single-tenant industrial properties, such as warehouses, distribution centers, manufacturing facilities and office buildings. Stag typically focuses on cheap, out of favor properties that it can improve upon to drive up lease values. By targeting this type of property, Stag is heavily dependent upon the success of the industrial retail and manufacturing spaces. According to the company, there is a significant opportunity to improve its market position in this space, given the low individual correlation of such assets, relatively lower capex requirement and the low average investment size that improves acquisition potential.
Stag is another REIT that switched from a quarterly to a monthly payment in 2013.
The Bottom Line
REITs can be great for generating higher yields, but they also tend to be very economically sensitive. REIT values fell through the floor during the financial crisis as defaults skyrocketed, income dried up and facilities went vacant. REITs are also sensitive to interest rates. REIT prices and interest rates generally move in opposite directions, but each sector responds uniquely. This will be especially important to keep an eye on given that interest rates are currently very low.
Sign up for a free trial to get access to the DARS rating. Get a dividend-specific newsletter delivered to your inbox every single day.