3 actions that earn you money every month
IIt’s a huge change when you go from saving for retirement to living on your retirement nest egg. The transition can be much easier with stocks that pay dividends monthly instead of quarterly, as that frequency is almost equivalent to collecting a paycheck.
If that’s right for you, then you’ll want to turn to Real Estate Investment Trusts (REITs) Real estate income (NYSE: O), Broadmark Real Estate Capital (NYSE: BRMK), and LTC Properties (NYSE: LTC). Here’s a quick look at each and the bright future that awaits them.
1. Quite a nickname
You know a company is dedicated to dividends when it goes by the nickname “The Monthly Dividend Company”. It is the income from real estate. The core of this REIT’s portfolio of nearly 6,600 properties is made up of single-tenant retail businesses, which represent approximately 85% of its rental income. The rest is largely industrial and office automation. Tenants of net leasehold properties are responsible for most of the operating costs of the properties they occupy, which means Realty Income need only collect its rent checks. Net leasing is generally considered a low risk investment approach in the REIT industry.
Image source: Getty Images.
Realty Income has an excellent record of returning money to investors, with 28 consecutive years of annual dividend increases to its credit. This makes them a dividend aristocrat, which is a very rarefied group. With plans to acquire $ 3.25 billion in 2021, there’s every reason to believe that the company’s history of slow and steady dividend growth will continue. Its return of around 4.5% at Wednesday morning prices is more than double what you would get from a S&P 500 Index fund and halfway over the past decade for the REIT. So it’s not a flashy buy, but it seems reasonably priced and would suit conservative types willing to pay full price for quality.
2. Substitute for the bank
Then the relative newcomer Broadmark Realty Capital, which is a mortgage REIT. Investors should generally be careful with mREITs, but this one is very different. For starters, this is called a hard money lender, offering construction loans to builders. It is an activity that the banks abandoned after the recession of 2007-2009, but which is vital in the construction industry. Broadmark entered that void as a private entity, then went public through a black check company at the end of 2019. The current yield is 7.9%.
There are a number of desirable attributes here. First, Broadmark is cautious in that it only lends about 60% of the expected value of a completed construction project. This provides a cushion in the event of changing market conditions. Second, it doesn’t use leverage like most other mREITs do. Having no debt greatly reduces the risk.
Broadmark reduced its dividend in 2020 because of the coronavirus. However, that was because of construction delays due to the pandemic, and not because the fundamentals of its business had changed. It has since started to increase the dividend again. Plus, he ended 2020 with over $ 200 million in cash to put to work. This will help grow his loan portfolio and possibly keep the dividend on the rise as well.
3. Get older and older
The last name on this monthly payroll is LTC Properties. LTC stands for “long term care”. The REIT portfolio is split approximately 50-50 between nursing homes and retirement homes. It uses the same net rental approach as Realty Income, so it doesn’t take the risk of tapping those assets (as some of its peers do). Thus, despite the headwinds of the pandemic, it has managed to collect the vast majority of its rents without any problem. That said, he worked with a few of his tenants on rent concessions to help them get through this difficult time.
O Dividend yield data by YCharts
The future is very bright here as the baby boomers continue to retire. This means that there is a significant demographic demand bubble ahead, and LTC is well positioned to take advantage of it. Helping your tenants to fend for themselves today is only a good deal as there is a material demand waiting on the other side, demographically speaking. In the meantime, investors can collect the 5.2% return on the REIT. Notably, despite owning some of the more risky properties, LTC hasn’t had to cut its dividend in 2020. That said, it hasn’t increased its dividend in years either. But if you’re looking for a monthly dividend backed by a needs-based (and needs-to-grow) business, LTC is a great option.
Time for some deep dives
Obviously, this is only a quick rundown of Realty Income, Broadmark, and LTC, but it should whet your appetite for those monthly dividend stocks. All of them have generous returns relative to the market, strong companies and good prospects for the future. If you are looking to replace your paycheck, you might find it very rewarding to do a little more research on this trio. If you do, one or more could end up in your wallet today.
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Reuben Gregg Brewer has no position in the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.