3 Monthly Dividend Stocks for a Growing Income in Retirement

Accelerating Dividends, Dividend Growth, Dividend Investing, High-Yield Investing, Real Estate Investment Trusts (REITs)

Owning a stock that you know will deposit a check into your bank account each month can give a sense of financial security that many Americans in retirement lack. With that in mind, Tim Plaehn shares three of his safest monthly dividend stocks that will pay you every month.

From my regular interactions with a large number of individual investors, I know there is an interest in income stocks that pay monthly dividends. My tendency has been to be somewhat skeptical of companies that choose the monthly dividend route. I view it as a lazy move by management to maintain investor interest.

As a result, when I review an income stock that pays monthly dividends, I start with somewhat of a preconceived bias against the company. For one of these stocks to make my recommendations list, I need to see a company that meets all of my income stock investment criteria. The core of these qualifications is having business operations that can produce sustainable and growing free cash flow.

Then, I want to see a history of dividend growth. Finally, there should be a current yield that is above similar stocks based on business operations and dividend growth rate. It is an interesting twist in that since I have held monthly dividend stocks to such high standards before I will recommend one, those stocks that have made the cut are now considered by me to be core holdings for any income-focused investor.

Here are three monthly dividend real estate investment trusts (REITs) that will add growing monthly dividends to your stock portfolio.

EPREPR Properties (NYSE:EPR) is a triple net lease REIT that owns properties in three distinct commercial property sectors. Megaplex theaters, entertainment retail centers, and family entertainment centers make up the majority of their leases. Additional recreation properties (the second sector) include metro ski parks, resorts, water parks, and golf entertainment complexes (Top Golf). The third sector consists of build to suit charter and private school facilities.

In January, the company received State of New York approval for a casino on property EPR owns in Sullivan County, New York. The resort is under construction and will include a golf course, water park, and entertainment village. All of EPR’s properties are operated by third party companies and the REIT’s income is the rental payments made on their long-term, triple-net leases. EPR currently yields 5.6% and has been growing the dividend by 6% to 8% every year. Compare that to the more popular monthly dividend net lease REIT, Realty Income Corp (NYSE:O), which yields 3.8% and has a lower dividend growth rate, and you should see an investment with superior potential.

STAGStag Industrial Inc. (NYSE:STAG) is an industrial REIT that owns free standing single tenant buildings that are used for industrial purposes such as light manufacturing, warehouses, and logistical services. Client companies are from a wide range of industries including automotive, air freight, containers and packaging, retail companies, industrial equipment and government agencies. Since its 2011 IPO, STAG has had a goal of 25% growth in the number of properties owned. Actual numbers have been higher with ownership of 291 buildings in 40 states at the end of 2015, compared to 105 owned properties at the end of 2011. STAG’s acquisition team uses a statistical model to evaluate potential acquisitions based on projected 20-year cash flows. Because of the modeling system, when the acquisition pace begins to slow, free cash flow growth should accelerate. STAG currently yields 6.7% and dividends are growing by about 3% per year.

Related: How to collect $3,620 on average for every month in 2016.

CLDTChatham Lodging Trust (NYSE:CLDT) is a hotel REIT that invests in upscale, extended-stay hotels and premium-branded, select-service hotels and owns 133 hotels wholly or through joint ventures. Hotel business fortunes tend to cycle with the overall economy, and the current slow growth trend is pretty good for hotel operators. Chatham Lodging increased its monthly dividend by 10% in early April. With its 2016 first quarter earnings report, the company announced that funds from operations (FFO) per share had increased by 15% compared to the same quarter a year ago. All of the hotel REITs sold off with significant share price declines in 2015. However, even as share values were falling, revenues and free cash flow were growing. Currently, CLDT yields 6.0%, compared to 4.2% a year ago.

Finding stable companies that regularly increase their dividends is the strategy that I use myself to produce superior results, no matter if the market moves up or down in the shorter term. The combination of a high yield and regular dividend growth is what has given me the most consistent gains out of any strategy that I have tried over my decades-long investing career.

And, there are currently over twenty of these stocks to choose from in my Monthly Paycheck Dividend Calendar, an income system used by thousands of dividend investors enjoying a steady stream of cash.