Most people are on a monthly income and expense cycle. They get paid a relatively steady amount each month to cover their recurring expenses.
Unfortunately, that frequency doesn’t align with most dividend stocks, which pay on a quarterly cycle. You’d need to carefully select those with dividend payments in offsetting quarterly cycles to achieve a relatively steady monthly passive income stream to cover expenses.
However, some companies pay monthly dividends, making it easier to match recurring expenses with monthly cash flows. Agree Realty (ADC -0.79%), EPR Properties (EPR -0.29%), Stag Industrial (STAG -0.33%), and Realty Income (O -0.27%) are four of the best monthly dividend stocks. They offer high-yielding dividends that they should be able to sustain (and grow) over the long term. Here’s what makes them ideal passive income investments.
High-yielding monthly dividend stocks
Less than 100 companies pay monthly dividends. While that provides investors with numerous options, many companies are either really small or have dividend sustainability issues. However, some solid options remain, led by REITs Agree Realty, EPR Properties, Stag Industrial, and Realty Income.
Here’s how much dividend income you could generate by investing $10,000 across these four REITs:
Monthly Dividend Stock
Annual Dividend Income
Monthly Dividend Income
Data source: Google Finance.
As that table shows, you could collect more than $500 of annual dividend income for every $10,000 invested into these four REITs. That’s due to their higher dividend yields. For comparison, a $10,000 investment in an S&P 500 index fund would only produce about $156 in dividend income, given its lower dividend yield of 1.56%.
Don’t fret if $10,000 is more than you can invest. You can invest a lot less, especially since many brokers allow you to buy fractional shares. However, the more you invest, the more passive monthly income you’ll collect.
High-quality monthly dividend stocks
Agree Realty, EPR Properties, Stag Industrial, and Realty Income stand out among the monthly dividend stocks for the sustainability of their high-yielding payouts. They have high-quality real estate portfolios and financial profiles.
Agree Realty focuses on owning single-tenant properties leased to retailers relatively resistant to economic downturns and e-commerce. Its top tenants are grocery stores, home improvement stores, tire and auto service locations, dollar stores, and convenience stores. The company’s leases supply it with steady rental income to pay dividends. It pays out a conservative portion of that income via its dividend (73% of its adjusted FFO), giving it a nice cushion while allowing it to retain some cash to invest in new income-producing properties. Agree Realty also has a strong investment-grade balance sheet, giving it additional financial flexibility to make new investments. Agree Realty’s steadily growing portfolio has enabled it to increase its dividend at a 6.1% compound annual rate over the past decade.
EPR Properties focuses on owning experiential real estate like movie theaters and other attractions. It leases these properties back to its operator, collecting rental income to pay its attractive dividend. EPR is producing enough income to cover its dividend with significant room to spare, giving it some funds to invest in new properties. It also has nearly $1.1 billion of liquidity to fund new investments. Future investments will further diversify and grow its rental income, improving the long-term sustainability of its dividend.
Stag Industrial owns warehouses and other industrial properties that it leases to tenants. These leases supply it with stable rental income to cover its monthly dividend. The company currently generates about $90 million of post-dividend free cash flow, giving it a nice cushion while allowing it to retain cash to invest in expanding its portfolio of income-producing industrial properties. Stag Industrial also has a strong investment-grade balance sheet, giving it additional financial flexibility to make new investments. The company’s steadily expanding portfolio allows it to increase its dividend.
Realty Income owns a diversified portfolio of retail, industrial, and entertainment properties that supply it with steady rental income. It also has a low dividend payout ratio for a REIT at 76.7% of its adjusted FFO. Meanwhile, it has one of the strongest balance sheets in the REIT sector. Those features give it lots of financial flexibility to continue expanding its portfolio so it can increase the dividend. Realty Income has increased its payout 103 times since its public offering in 1994, growing it at a 4.4% compound annual rate.
Ideal passive income producers
Agree Realty, EPR Properties, Realty Income, and Stag Industrial provide their investors with above-average yielding dividends that they pay monthly. They also back those payouts with strong financial profiles, giving them the flexibility to continue expanding. These features make them the perfect dividend stocks for generating passive income.
Matthew DiLallo has positions in EPR Properties, Realty Income, and Stag Industrial. The Motley Fool has positions in and recommends Stag Industrial. The Motley Fool recommends EPR Properties and Realty Income. The Motley Fool has a disclosure policy.