Many companies pay dividends, and most of them make quarterly payments. However, some make monthly payouts, making them ideal for those seeking to generate passive income.
Here are four monthly dividend stocks that currently yield over 4% and have strong foundations to support their ability to produce reliable passive income.
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Agree Realty(NYSE: ADC) is a real estate investment trust (REIT) focused on single-tenant retail properties secured by net leases or ground leases. Those lease structures produce very stable rental income because tenants cover all property operating costs.
The REIT focuses on investing in retail properties leased to high-quality tenants (67.8% of which have investment-grade credit ratings) in durable retail industries, including grocery stores, home improvement stores, and tire and auto service centers.
Its portfolio produces very stable rental income to support its monthly dividend, which currently yields 4.3%. Agree Realty currently pays out less than 75% of its funds from operations (FFO) in dividends, allowing it to retain cash for investing in additional income-generating retail properties.
The REIT also has a strong investment-grade balance sheet. It routinely invests in more properties — it’s targeting $1.4 billion to $1.6 billion in spending this year — which grows its FFO and dividend. Agree Realty has raised its dividend by 2.4% over the past year.
EPR Properties(NYSE: EPR) is also a REIT. It invests in experiential real estate, such as movie theaters, eat-and-play venues, and attractions. It leases these properties back to operating companies, primarily under long-term net leases. This enables it to generate stable rental income to support its 6.3%-yielding dividend.
The REIT also has a conservative payout ratio and balance sheet. This gives it the flexibility to invest between $200 million and $300 million annually in expanding its portfolio. EPR Properties will acquire experiential properties in sale-leaseback transactions and provide development funding.
Management sees an investment opportunity exceeding $100 billion in experiential real estate. It has currently committed $109 million for experiential development and redevelopment projects that it expects to fund over the next 18 months. The company’s current investment rate should support annual growth in the low to mid-single digits in FFO per share and its dividend.
Main Street Capital(NYSE: MAIN) is a business development company (BDC). It provides debt and equity capital to lower-middle-market companies (those with between $10 million and $150 million in annual revenue). Management will also make debt investments in middle-market companies. These generate interest and dividend income.
The BDC pays out a portion of this recurring income via a monthly dividend set at a sustainable rate. And Main Street Capital periodically pays supplemental quarterly dividends from its excess earnings.
The company’s monthly dividend currently yields 4.9%, while the overall yield increases to 6.9% when including its annualized supplemental payments. Main Street Capital aims to steadily increase its monthly dividend while also making larger supplemental payments as it expands its investment portfolio. It has raised its monthly dividend by 4.1% over the past year.
Stag Industrial(NYSE: STAG) is another REIT. It owns industrial real estate, including light-manufacturing facilities and warehouses. It leases these properties to tenants under long-term agreements with rental escalation clauses (for a 2.9% weighted average increase this year). That provides it with a stable and growing income to cover its 4.3%-yielding monthly dividend.
The REIT currently pays out about 70% of its available free cash flow in dividends, enabling it to retain over $100 million annually. Stag Industrial uses its retained earnings and strong balance sheet to invest in new income-generating industrial properties.
It currently plans to acquire between $350 million and $650 million in properties this year. It’s also starting to invest in ground-up development projects. These investments should grow Stag’s FFO per share, enabling it to continue increasing its dividend, which it has done every year since its initial public offering in 2011.
Agree Realty, EPR Properties, Main Street Capital, and Stag Industrial all pay monthly dividends with yields above 4%. They back those payouts with stable cash flows and rock-solid financial profiles. All four companies expect to continue increasing their monthly dividends, further enhancing their appeal as ideal monthly dividend stocks to buy for passive income.
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Matt DiLallo has positions in EPR Properties, Main Street Capital, and Stag Industrial. The Motley Fool has positions in and recommends EPR Properties. The Motley Fool recommends Stag Industrial. The Motley Fool has a disclosure policy.
