One of the best things about owning rental real estate is getting monthly passive income straight through the mail. Of course, this income must quickly be divided between mortgage payments, reserves, insurance, property taxes and various other expenses. And you have to spend the month wondering what’s going to break, which tenants are going to leave and what’s going on with property prices. If only there was an easier way to get passive income checks every month.
There are! Real estate income (O 0.95%), REP properties (REP 1.05%)and Gladstone Land (GROUND 3.67%) are real estate investment trusts (REITS) that all send unconditional monthly dividends to shareholders. You can choose to reinvest the dividend, use it to invest in another stock, or withdraw the money to spend. Let’s review the three stocks and their dividend programs.
1. Real estate income
Realty Income is the big dog in the monthly dividend. He actually trademarked the phrase “The Monthly Dividend Company,” and he qualifies as a dividend aristocrat, which means he’s raised his dividend for at least 25 consecutive years.
Realty Income is a net-lease REIT, which means its leases are triple-net, requiring the tenant to pay all insurance, taxes and maintenance costs. It has more than 11,200 properties and is diversified into grocery stores, convenience stores, restaurants, pharmacies, home improvement stores, gyms and even movie theaters.
If you could call any REIT a machine, Realty Income is. Earnings per share have increased in 25 of the past 26 years, and so has the dividend. It has an A3-rated balance sheet and good prospects for global growth. All signs point to it continuing to pay higher and higher dividends every year.
Speaking of the dividend, the yield is 4% and draws only 75.6% of the REIT’s Adjusted Funds From Operations (AFFO). If you invest $10,000 in real estate income, you can expect a dividend starting at around $34 per month and that dividend increasing every quarter, as it has for 96 years.
2. Properties of REP
EPR Properties has not had as stable a share price as Realty Income. It is an entertainment REIT that invests primarily in cinemas and other facilities that provide an experience for shoppers. Thanks mainly to COVID-19, EPR shares have fallen about 20% over the past five years. For savvy investors, this may be good news.
This means that the EPR has been tested as hard as a REIT can be and passed. It had to suspend the dividend for a while, but the yield is already back up to 6.25%, and that was with a 66% payout ratio in Q1 – there’s still room for more growth size of the dividend, even if the cash flow does not increase much.
However, the REIT is showing a good growth profile. In the first quarter earnings release, management spoke of its renewed interest in new investments and said its “pipeline is accelerating significantly.”
EPR has a strong dividend with strong growth potential. The real question for investors is whether its balance sheet is strong enough. EPR has nearly 10 times more debt than cash. While it’s normal for REITs to finance their investments with debt because they can’t retain their earnings, it could pose a problem for the company if it were to refinance the debt at a much higher rate in the future. years to come.
3. Gladstone Land
Gladstone Land is a farmland REIT that owns 113,000 acres in 15 states. The land is leased to farmers and the REIT focuses on land where healthier foods, such as fruits and vegetables and not grains, are grown.
At first glance, Gladstone is not as attractive an investment as the first two REITs. Its dividend yield is just 2.2%, and Q1 2022 revenue and cash flow were both down from Q1 2021. An investment in Gladstone is an investment in diversification.
Historically, farmland returns have not correlated to general stock market returns, and farmland REITs like Gladstone benefit from inflation. When inflation really started to pick up towards the end of 2021, Gladstone stock soared; it increased by 80% from November 2021 to April 2022.
The problem is that the stock price is back to where it was in November of last year.
Of course, nothing explains the market. The company is still doing well, and according to a management report released in June, it was enjoying inflation of 11.9% in the types of crops grown by its tenants. Even farms in its weakest regional market (drought-ravaged California) were recently valued 5.4% higher than a year ago, and 99.8% of its debt is fixed for the 5 , next 3 years.
There hasn’t been any major news that has dragged the stock price down recently, and this management report was a response to the stock’s volatility. If Gladstone can continue to accumulate farmland assets and benefit from inflation, this could be the best time to buy.