One of the most cost-efficient ways to generate passive income is by investing in dividend-paying stocks. While most companies pay you a dividend every quarter, there are a few that have a monthly payout structure. Here, we look at three real estate investment trusts or REITs that pay investors a dividend each month.
AGNC Investment (NASDAQ: AGNC) operates as a REIT or real estate investment trust. It invests in residential mortgage pass-through securities and collateralized mortgage obligations where the principal and interest payments are secured by the government-sponsored entities in the U.S. At the end of Q2, AGNC had around $56.8 billion of mortgage-backed securities that were secured. Its total investment portfolio stood at $58.4 billion.
These investments are funded through collateralized borrowings that are structured as repurchase agreements. It basically borrows capital at lower lending rates in the short-term which are used to acquire higher-yielding long-term assets, including mortgage-backed securities. AGNC aims to maximize the net interest margins which is basically the difference between long-term yields and the borrowing rates.
The REIT pays investors a monthly dividend of $0.12 per share, indicating an annual payment of $1.44 per share. At its current price, AGNC stock offers investors a forward yield of 8.93%.
While it makes sense to invest in this REIT for steady gains, you should note that AGNC stock has trailed the broader markets over the long term. AGNC stock is up over 100% in dividend-adjusted returns in the last 10 years compared to the S&P 500 gains of 345%.
The second stock on my list is LTC Properties (NYSE: LTC) that has a monthly dividend payout of $0.19 or $2.28 each year, indicating a forward yield of over 7%. The company owns mortgages on 176 properties in 27 states in the U.S. It focuses on long-term care properties and its portfolio is roughly split between senior housing and skilled nursing developments.
The care properties segment was hit hard amid COVID-19 and Senior Care Centers also filed for bankruptcy protection last year. In fact, Senior Care accounted for 11 skilled nursing facilities in LTC’s portfolio.
Despite macro-economic pressures, LTC Properties maintained its dividend yield and is experiencing an uptick in admissions across properties since the start of 2021. The accelerated pace of the COVID-19 vaccination rollout is now acting as a massive tailwind for LTC which will result in a lower payout ratio for the company in Q4 and beyond.
Shares of LTC Properties have returned 108% in the last 10 years and have declined by 14.5% since October 2016.
The final stock on my list is Stag Industrial (NYSE: STAG) which is focused on the acquisition and operation of single-tenant, industrial properties in the U.S. The stock is up 30% in the last year and has returned 130% to investors in the last five years. Since October 2011, Stag Industrial shares have risen close to 600% in dividend adjusted returns.
Despite these market beating gains, it offers investors a forward yield of 3.6% and its dividend payouts have increased for seven consecutive years.
Stag Industrial focuses on the acquisition of single-tenant industrial properties. Around 40% of its portfolio is connected to the e-commerce sector and no single company accounts for more than 4% of total revenue. It ended Q2 with an occupancy rate of 96.8% and over 70% of its leases have contracts extending beyond 2023.
Stag Industrial also has a financially sound balance sheet with a net debt to adjusted EBITDA multiple of 4x.
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