This week we feature Tim Plaehn, dividend and income investing expert and editor of The Dividend Hunter, a new income service for investors looking to capture yield and gains from the hottest dividend stocks. Prior to joining Investors Alley Tim was an F-16 pilot, stock broker, certified financial planner, and contributor to USA Today, The Houston Chronicle, Seeking Alpha, and many others.
The common practice for U.S. dividend paying companies is the quarterly dividend payment. That schedule works well for the companies, since they have to file a report with the SEC every quarter, but us humans run much of our financial lives on a monthly schedule. A small portion of the total number of dividend paying companies have realized this fact and make monthly dividend payments. Combine the steady returns of a quality real estate investment company (REIT) and monthly checks and you have an attractive addition to your stock portfolio.
Monthly dividends provide a couple of additional benefits besides providing a payment schedule to match your bills. The fact that a dividend is paid every month tends to result in a steadier share price compared to quarterly dividend payers. Also if you reinvest dividends, putting the new cash flow to work every month will help you increase your share ownership count at a faster pace than waiting for three months between dividends.
REITs own different types of commercial real estate, and this list below provides exposure to several different sectors of the real estate market. This diversification will result in varied dividend yields but also give you exposure to a range of growth cycles.
Inland Real Estate Corporation (NYSE: IRC) is a small cap retail shopping center REIT that’s a big player in the two markets of Chicago and Minneapolis. The company has ownership interest in 157 power (38%) neighborhood and community retail centers. Three-quarters of the tenants are national or regional chains. IRC has paid a steady monthly $0.475 dividend since June of 2009, giving the shares a current 5.4% yield. The $0.57 annual dividend is well protected, with the company generating the REIT cash flow metric funds from operations (FFO) of $0.99 in 2013.
Stag Industrial Inc (NYSE: STAG) owns single tenant, industrial properties under the triple net lease (NNN) strategy. With a NNN lease, the lessee is responsible for all of the property expenses such as taxes, insurance and maintenance, and STAG just has to collect the monthly lease payment. This REIT switched from quarterly to monthly dividends for the fourth quarter of 2013. Since going public in 2011, the STAG dividend has been increased by an average of 6% per year. The 2013 fourth quarter dividends were 85% of FFO and STAG currently yields 5.2%.
Realty Income Corp (NYSE: O) bills itself and has registered the trademark of “The Monthly Dividend Company”. Realty Income owns almost 4,000 properties across 47 industries located in 49 states. The business model focuses on long-term, 10 to 20-year leases and currently has an occupancy rate above 98%. The company has paid dividends for 45 consecutive years and has increased the monthly dividend at least once a quarter for 11.5 years. Realty Income currently yields 5.4%.
Chambers Street Properties (NYSE: CSG) buys and operates high-quality industrial and office properties. As of the end of 2013, the portfolio included 129 properties in 20 states, France, Germany and the U.K. The European properties make up about 13% of the portfolio. CSG changed from quarterly to monthly dividends in September 2013. The dividend reduction in the second quarter of 2013 brought the payout back below the FFO and the current dividend rate is 85% of the cash available for distribution to investors. CSG currently yields 6.5%.
High-Yield Bonus Monthly Pay REIT
Whitestone REIT (NYSE: WSR) owns over 50 community shopping centers in Arizona, Texas and Illinois. This REIT has a client base more heavily populated by smaller, local businesses. One benefit of this approach is that local companies pay higher rental rates than do larger national companies. Because of the riskier tenant profile, the market has put a higher yield on WSR. This monthly dividend payer currently yields 7.9%. The dividend rate has been level since the mid-2010 IPO.
Own any of these? What’s your outlook on REITs? Do you prefer quarterly or monthly dividend payers? Write me at [email protected].