For investors seeking a steady stream of monthly income, real estate investment trusts (REITs) that pay dividends on a monthly basis emerge as a compelling financial strategy. In this article, we unravel two REITs that pay monthly dividends and have yields up to 5.2%.
Agree Realty Corporation
Agree Realty Corporation (NYSE:ADC) owns and manages a portfolio of 2,135 properties across 49 states containing approximately 44 million square feet of gross leasable space. It counts world-class retailers such as Lowe's, McDonald's, Starbucks, CVS, Walmart, ULTA, Home Depot, Target, and Costco as tenants.
Agree Realty currently pays a monthly dividend of $0.247 per share, equating to an annualized dividend of $2.964 per share and giving its stock a yield of about 5.2% at the time of this writing.
Agree is also a dividend-growth star. It has raised its annual dividend payment for 11 consecutive years, and it's already on track for 2024 to mark the 12th consecutive year with an increase.
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Stag Industrial (NYSE:STAG) owns and operates 568 industrial properties in 41 states consisting of approximately 112 million square feet. It counts Amazon and FedEx as two of its largest tenants.
Stag currently pays a monthly dividend of $0.123333 per share, equating to an annualized dividend of $1.48 per share and giving its stock a yield of about 3.9% at the time of this writing.
Like Agree Realty, Stag is a serial dividend raiser, growing its annual dividend every year since its initial public offering in 2011.
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REITs and stocks can both pay dividends, usually on a monthly, quarterly, or yearly basis. Some investments will also offer special dividends, but they're unpredictable.
REITs must prioritize short-term income for investors
In exchange for more ongoing income, REITs have less to invest for future returns than a growth mutual fund or stock. “REITs are better for short-term cash flow and income versus long-term upside,” says Stivers.
For each tax year, the REIT must derive: at least 75 percent of its gross income from real property-related sources; and. at least 95 percent of its gross income from real property-related sources, dividends, interest, securities, and certain mineral royalty income.
According to the National Association of Real Estate Investment Trusts (Nareit), non-traded REITs typically require a minimum investment of $1,000 to $2,500.
REITs make their money through the mortgages underlying real estate development or on rental incomes once the property is developed. REITs provide shareholders with a steady income and, if held long-term, growth that reflects the appreciation of the property it owns.
Non-traded REITs have little liquidity, meaning it's difficult for investors to sell them.Publicly traded REITs have the risk of losing value as interest rates rise, which typically sends investment capital into bonds.
Since they aren't publicly available and don't register with the SEC, it's difficult to pinpoint specific investment minimums. However, investment firm Edward Jones says minimum investments for private REITs can range from $1,000 to $50,000.
“I recommend REITs within a managed portfolio,” Devine said, noting that most investors should limit their REIT exposure to between 2 percent and 5 percent of their overall portfolio. Here again, a financial professional can help you determine what percentage of your portfolio you should allocate toward REITs, if any.
For purposes of the REIT income tests, a non-qualified hedge will produce income that is included in the denominator, but not the numerator. This is generally referred to as “bad” REIT income because it reduces the fraction and makes it more difficult to meet the tests.
Derive at least 75% of its gross income from rents from real property, interest on mortgages financing real property or from sales of real estate. Pay at least 90% of its taxable income in the form of shareholder dividends each year. Be an entity that is taxable as a corporation.
A REIT is taxable as a regular corporation, but is entitled to the dividends paid deduction. Therefore, a REIT does not pay federal income tax on net taxable income distributed as deductible dividends to shareholders. Net income from foreclosure property is taxed at 35 percent.
While some stocks distribute dividends on a quarterly or annual basis, certain REITs pay quarterly or monthly. That can be an advantage for investors, whether the money is used for enhancing income or for reinvestment, especially since more frequent payments compound faster.
Reinvesting REIT dividends can help retirement savers grow their portfolio's investment, and historically steady REIT dividend income can help retirees meet their living expenses. REIT dividends historically have provided: Wealth Accumulation. Reliable Income Returns.
The common denominator among all REITs is that they pay dividends consisting of rental income and capital gains. To qualify as securities, REITs must payout at least 90% of their net earnings to shareholders as dividends.
However, there are a number of assets that pay income on a monthly basis. Options include savings accounts, certificates of deposit, annuities, bonds, dividend stocks, rental real estate and more.
A REIT is required to pay a dividend of at least 90 percent of its taxable income each year. A dividend is any distribution of cash or property made by a corporation to its shareholders out of its earnings and profits from the current taxable year and then from accumulated earnings and profits from prior years.
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