Real estate investment trusts (REITs) is one of the most popular options for investors seeking regular income. A REIT must distribute more than 90% of its earnings each year in order to maintain its tax-free status. For investors, that means relatively high dividend payments and consistent dividend policies.
REITs rebounded from the subprime mortgage meltdown of 2008 that hammered real property values for some years.
They have become popular with investors because they often pay a higher dividend yield than corporate or government bonds. The shares also are traded on exchanges, giving them the potential for growth as well as income. The average annual return, as measured by the MSCI U.S. REIT Index, was 9,28% as of April 2020.
However, greater returns come with greater risks, as we certainly learned in 2008. Real estate is not for the faint of heart, even when you're leaving the decisions up to the professionals.
- Real estate investment trusts (REITs) are a great investment for collecting steady income.
- There are a handful of REITs that pay monthly dividends.
- Some of the most well-known monthly dividend payers include American Capital Agency Corporation (AGNC) and EPR Properties (EPR).
- Meanwhile, other monthly dividend REITs are no longer paying out dividends monthly or have suspended dividends altogether, such as Apple Hospitality (APLE) and Bluerock Residential Growth (BRG).
REITs That Pay Out Monthly
While most REITs distribute dividends on a quarterly basis, certain REITs pay monthly. That can be an advantage for investors, whether the money is used for enhancing income or for reinvestment, especially since more frequent payments compound faster.
Here are a half-dozen prospects, each specializing in a different niche of the real estate sector.
American Capital Agency Corporation (AGNC)
American Capital Agency Corporation (AGNC) invests in high-quality mortgage-backed securities including pass-through securities and collateralized mortgage obligations guaranteed by a government-sponsored agency, such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (better-known, respectively, as Fannie Mae and Freddie Mac).
It also invests in some residential and commercial mortgage-backed securities that are not government-guaranteed.
The holdings of the company represent debt that is highly sensitive to changes in market interest rates, making America Capital Agency's holdings susceptible to interest rate risk. However, management extensively hedges its interest rate risks and regularly rebalances the portfolio.
As of April 2020, American Capital Agency Corporation had a dividend yield of 10.7% with an annual dividend of $1.44.
Apple Hospitality (APLE)
Apple Hospitality (APLE) specializes in upscale hotels. One of the largest hospitality-sector REITs, it owns and operates (through property management companies) 233 mostly Marriott and Hilton-branded hotels in urban, suburban and developing markets. The company has consistently reinvested a big portion of its cash flows into its portfolio, resulting in high customer satisfaction and stable capital needs.
As of March 2020, the company paid an annual dividend of $1.20 dividend, but it has not paid a monthly dividend since (as of May 2020)
Bluerock Residential Growth (BRG)
Bluerock Residential Growth (BRG) is a small-cap trust that specializes in investing and operating multifamily residential communities in growth markets throughout the U.S. The current portfolio consists of 53 apartment buildings or complexes in Texas, Florida, Georgia, Washington, Colorado, Arizona, Nevada, Alabama, Tennessee, South Carolina, and North Carolina.
Most of the company's properties have high occupancy rates, above 90%. Unlike many REITs, Bluerock often partners with regional property owners and operators in order to benefit from their expertise in local real estate markets.
Management has grown the trust aggressively since 2014 and is constantly on the lookout to add more high-quality properties to its portfolio.
However, since 2018, Bluerock Residential Growth switched from paying dividends monthly to paying them quarterly. As of May 2020, the company's dividend yield stood at 10.2%, on an annual dividend of $0.65.
EPR Properties (EPR)
EPR Properties (EPR) is a small-cap growth REIT that specializes in two quite distinct real estate sectors. One is entertainment, performance, and recreation venues such as theaters, theme parks, and casinos. The other is education, specifically private schools, and early childhood education centers.
It holds properties in 41 states plus Ontario, Canada. EPR Properties typically rents its properties using triple net leases with operational, maintenance, insurance, and tax costs borne by its tenants.
Due to its varied business model, the company considerably outperformed the MSCI US REIT Index for the five years ended 2019.
As of May 2020, the company paid a $4.59 dividend, and its dividend yield was 15.2%.
LTC Properties (LTC)
LTC Properties, Inc. (LTC) manages a portfolio of senior housing and long-term care facilities, including skilled nursing, assisted living, independent living, and memory care facilities. It currently owns 177 properties in 28 states.
LTC primarily earns its income by leasing its properties using triple net leases and investing in mortgage loans.
As of May 2020, its annual dividend was $2.28 for a yield of 6.33%.
Stag Industrial (STAG)
Stag Industrial (STAG) invests in industrial-use properties, mostly distribution centers and warehouses with some light manufacturing facilities thrown in. It has 450 properties in 38 states.
Stag leases its buildings to single tenants, so it doesn't have to contend with constant turnover as multi-tenant properties like shopping centers and office parks often do. It claims a 70% tenant retention rate, with an average lease running nearly five years.
As of May 2020, the company paid a $1.44 annual dividend, and its dividend yield was 5.7%.