Most dividend stocks make quarterly payments. That can make it more challenging for those seeking to align their income with their monthly expenses. You’d need to do a bit more work to build a portfolio of companies with staggered dividend payment schedules so that you can generate enough income each month to help cover some of your expenses.
However, some companies make it easy to align your income with your expenses by paying monthly dividends. Realty Income (O -0.78%) and Agree Realty (ADC -1.16%) are two of the best monthly dividend stocks. They also pay high-yielding dividends, which allows investors to generate more income each month.
The name says it all
Realty Income also goes by the name The Monthly Dividend Company. It has certainly been that over the years. The real estate investment trust (REIT) has declared 655 consecutive monthly dividends throughout its history. It has raised its dividend 128 times since its public market listing in 1994, including for the past 109 quarters in a row. The REIT has grown its payout at a 4.2% compound annual rate over the past 30 years. Its dividend currently yields 5.8%, which is well above the S&P 500’s 1.2% yield. At that rate, every $100 invested in the REIT could produce $5.80 of dividend income each year, compared with just $1.20 if invested in an S&P 500 index fund.
The REIT owns a diversified portfolio of net lease properties. Those leases provide very stable rental income because tenants cover all operating expenses, including routine maintenance, building insurance, and real estate taxes. It currently owns over 15,450 properties leased to more than 1,550 clients in 90 industries across the U.S. and Europe. It gets 79.4% of its rent from retail tenants, 14.4% from industrial properties, 3.2% from gaming facilities, and 2.9% from other properties, including data centers.
Realty Income has steadily expanded its portfolio over the years. It buys properties in sale-leaseback transactions with owner-operators, acquires portfolios from investors, merges with other REITs, and invests in build-to-suit projects. Last year, it closed its $9.3 billion merger with fellow REIT Spirit Realty and invested more than $3.5 billion into other property investments.
The REIT has a strong financial profile, which gives it lots of flexibility to continue making acquisitions. It also recently launched a private market fund management platform to tap into a large source of acquisition funding. Future acquisitions should grow its rental income, enabling it to continue increasing its high-yielding monthly dividend.
Cashing in on retail real estate
Agree Realty switched to a monthly dividend schedule a few years ago. It has grown its payout at a healthy 5.6% compound annual rate over the past decade. Its dividend currently yields 4.3%.
The REIT has a much more focused investment strategy. It invests only in retail properties secured by net leases (81.1% of its annual base rent) or ground leases (10.9%), such as grocery stores, home improvement centers, and tire and auto service locations. Those lease structures deliver very stable rental income. The REIT also focuses on owning properties leased to financially strong retailers, which adds to its income stability: 68.2% of its rent comes from investment-grade tenants.
Agree Realty typically buys retail properties from existing and new partners in sale-leaseback transactions. Last year, it invested $866.6 million into acquiring 242 retail net lease properties. It also had 41 development projects that it either completed last year or are currently under construction for a total projected cost of $179.9 million. These investments helped grow its portfolio to 2,370 properties and increased its adjusted funds from operations by 4.6% last year, which supported a 2.8% raise in its monthly dividend.
The REIT has a strong financial profile. That supports its view that it can invest another $1.1 billion to $1.3 billion into new retail properties this year. It has a very long growth runway. Its retail partners currently own more than 169,000 locations, which the REIT could acquire in the future.
High-quality, high-yielding monthly dividend stocks
Realty Income and Agree Realty are great dividend stocks to buy for those seeking a monthly payout. Because both offer high-yielding dividends backed by high-quality real estate portfolios and strong financial profiles, these REITs should be able to continue growing their portfolios and monthly payouts in the coming years, which should help their investors cover their rising monthly expenses.
Matt DiLallo has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.
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