Companies that pay monthly dividends are great for those seeking to generate investment income. Their regular payments better align with recurring expenses.
Stag Industrial(NYSE: STAG) and Gladstone Land(NASDAQ: LAND) are among the handful of companies that cut their investors a check each month. Here's why those seeking monthly dividends should take a closer look at these companies.
Monthly income backed by industrial real estate
Stag Industrial currently pays a monthly dividend of $0.1225 per share ($1.47 annualized). That gives the real estate investment trust (REIT) a 4.3% dividend yield at its recent share price. At that rate, it would turn a $10,000 investment into a $35.83 monthly income stream ($430 annualized).
The REIT supports that payout with a diversified portfolio of industrial real estate. It leases these properties to high-quality tenants under long-term agreements. Those leases feature contractual rate increases that average about 2.5% per year, supplying the REIT with steadily rising rental income to support its dividend.
Stag Industrial pays out a reasonable percentage of its stable income via dividends (76% in 2023). That gives it a decent cushion while allowing it to retain cash (about $85 million per year) to fund new investments. The REIT also has a solid balance sheet with a relatively low leverage ratio (4.9 times). That gives it additional financial flexibility to make new investments.
Acquisitions are Stag Industrial's primary growth driver. The REIT expects to acquire $300 million to $700 million of properties this year. It focuses on value-add deals where it can invest additional capital to renovate or expand properties to increase their rental income.
Growing rental income should enable Stag to continue increasing its dividend. The REIT has steadily raised its payout since going public and initiating a dividend in 2011.
Farming a steadily rising dividend
Gladstone Land pays $0.0464 per share each month ($0.5568 annually). That puts the farmland REIT's dividend yield at 4%. The REIT has paid 128 consecutive monthly dividends since its initial public offering (IPO) in January 2013 and has increased its payout 32 times over the last 35 quarters.
Gladstone Land generates relatively stable rental income by leasing its farms to farmers who operate the properties. It typically earns a fixed cash rental rate that escalates each year. Some leases feature a fixed rate (with annual escalation) plus a percentage of the farm's gross revenues. These leases enable the REIT to collect steadily rising rental income that typically outpaces inflation.
The farmland owner's other growth driver is acquisitions. It has grown its portfolio from $75 million at its IPO to over $1.6 billion largely through acquisitions. Gladstone Land is very selective, only buying farms it can lease to high-quality operators while earning an acceptable return. Finding good deals is getting harder these days due to the rise in interest rates and currently high farmland prices. However, the company remains disciplined. That patience should pay off over the long term. It's in an excellent position to capitalize on acquisition opportunities that should emerge when rates or farmland values fall.
Sit back and collect monthly income from these REITs
Stag Industrial and Gladstone Land pay attractive monthly dividends supported by rental income from high-quality real estate portfolios. That income should grow as rents rise and these REITs expand their portfolios, which should allow them to continue increasing their dividends. Those features make them ideal options for those seeking recurring income to help cover monthly expenses.
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Matthew DiLallo has positions in Gladstone Land and Stag Industrial. The Motley Fool has positions in and recommends Gladstone Land and Stag Industrial. The Motley Fool has a disclosure policy.
