Five Monthly Dividends to Love and One to Avoid

Followers of my blog will know that I really like REITs. They’re are a relatively low risk way to generate income from your investment portfolio. Instead of reinvesting the dividends, I am returning them to my cash holdings to pay for fun things in life. One of the downsides of many REITs and dividend paying stocks is the infrequency of payments. Most dividend payers distribute quarterly, making the waiting hard and “lumpy”. You may have a very uneven distribution of income, which is less of an issue if you’re younger and still working like me, but can be difficult to budget for if you’re in retirement on a fixed income.

A potential solution to this is to choose monthly dividend payers. There aren’t many of them, but the ones that do pay monthly are quite good. Some of this is likely intentional. These REITs have stable predictable cash flows that allow them to budget for dividend payouts every month. We also know that I’m a fan of MAIN so we won’t include them in this list.

Without further ado, here are the five dividend grower REITs to like starting with the lowest yield.

Five Monthly Dividend REITs to Like

Realty Income (O)

Realty Income brands itself as “The Monthly Dividend Company”. O owns over 5,000 commercial properties and has a highly predictable cash flow making them one of the lowest risk and easiest to price REITs in the market. With a current yield of 4.43%, you will have a hard time matching an equivalent REIT with such low risk. This is reflected in O’s high price compared to book value. Investors are willing to pay a significant premium for a known quantity.

LTC Properties (LTC)

LTC Properties invests in Senior Housing and Healthcare properties throughout the US. LTC has been growing dividends for several years. I actually owned LTC over 10 years ago and sold it for some reason. LTC currently yields 5.31% and is slightly overpriced according to my models. If LTC starts trading closer to $30-35, then I will be a buyer.

* Update: Unfortunately, LTC has not raised their dividends for several years and I can no longer suggest that they are a monthly REIT to like, although their long term growth prospects in this industry seem favorable.

STAG Industrial (STAG)

STAG is an industrial property investor. Unfortunately, STAG sits in a relatively bad spot in terms of expected yield vs volatility. EPR provides greater yield with lower volatility even though it is in what some may consider a “riskier” sector. If you’re looking to diversify into an industrial REIT and retain monthly distributions, then STAG is likely your best bet.

EPR Properties (EPR)

EPR Properties invests in an eclectic mix of entertainment properties ranging from movie theaters to Top Golf ranges. It has had a mix of challenges over the past few years, but has continued to pay on its monthly dividend like clockwork. As I mentioned above, EPR provides a higher return with less volatility than STAG, but also likely provides a little more correlation with the overall market.

Chatham Lodging Trust (CLDT)

Chatham Lodging Trust is a hospitality trust with a relatively small portfolio of high-end, luxury hotels. Like STAG, CLDT is a relatively more risky REIT when compared to EPR, LTC, or O. It provides more yield than STAG, but also has incrementally more volatility making it a holding for those who want more diversification of their monthly dividend portfolio.

One Monthly Dividend REIT to Avoid

Apple Hospitality REIT (APLE)

Apple Hospitality is a hotel/lodging focused REIT owning over 200 Hilton and Marriott branded hotels through franchising agreements. Unfortunately, while APLE has a nice yield at 7.38%, it hasn’t consistently grown its dividend. This means your income falls when adjusting for inflation. While it might seem that if a company isn’t growing its dividend that it would be growing its share price since it is retaining some earnings and reinvesting in growth, that isn’t the case. APLE’s five year return is down! Overall, your investment base is shrinking and your real income is shrinking which is the worst of both worlds for an income investor. Unless management can turn this situation around, I would avoid their stock.

Disclosure: At the time of writing, I have a long position in EPR Properties and STAG Industrial.

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