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2 Monthly-Paying REITs for an Uncertain Market

Interest rates remain low and stock prices remain elevated. Where can an income investor turn? Try these two monthly-paying REITs.

Calendar Red Line Chart Summer Months

Interest rates remain low and stock prices remain elevated. Where can an income investor turn? Try these two monthly-paying REITs.

This is a tricky market for income investors. Despite the ongoing pandemic restrictions, the market continues to climb ever higher. Exposure to this market gives you a sense that you’re playing musical chairs, and the music has been playing for too long.

At the same time, interest rates are pathetically low. Bonds are low-paying and treacherous ahead of what is likely to be a period of rising interest rates. And traditional investments in CDs and savings accounts don’t pay enough to even keep up with taxes and inflation.

Fortunately, there may be a good answer to the current environment: monthly-paying REITs.

While the market is high priced in nose-bleed territory, some of the very best income-paying stocks on the market are still reasonably valued. REITs have vastly underperformed the market in this recovery so far. They have been neglected by investors as technology stocks dominated in the early part of the recovery and cyclical stocks drove the market over the past several months.


But times are changing. Investors are realizing the value in an expensive market. REITs are the best performing sector of the S&P 500 over the past three months, and the second best over the past month. Now, the sector offers momentum as well as value.

Despite the current income investor conundrum, you can actually find a high monthly income from some of the very best income producing securities on the market. Here are two of the best monthly-paying REITs.

The 2 Best Monthly-Paying REITs

Monthly-Paying REIT: Realty Income (O)

Yield 4.1%

Realty Income is one of the highest-quality and best-run REITs on the market. Cash flow from a conservative portfolio of 6,500 properties has enabled the company to amass a phenomenal track record of paying dividends—to such an extent that Realty Income actually has the audacity to refer to itself as “The Monthly Dividend Company”.

The large REIT has operated for more than 51 years and its 6,500 properties are rented to 600 different tenants in 49 states, Puerto Rico and the United Kingdom. Since its 1994 IPO, Realty Income has amassed a record of one of the most successful income investments on the market.

Here are a few things to like about it.

  • 15% average annual total return since 1994
  • 610 consecutive monthly dividends
  • 93 consecutive quarters of dividend hikes
  • 5% annual dividend growth since 1994
  • Sky-high credit ratings

A great business formula delivers such results. Realty buys established properties and leases them back to tenants under long-term leases of 10 to 20 years. Most of these contract are “triple net leases” whereby the tenants pay all the costs associated with the property including maintenance, insurance and taxes. This reduces unpredictable expenses and provides a rock solid cash flow.

I like the timing. As a retail REIT, O took it on the chin during the pandemic—but unjustifiably so. The biggest tenants (Walgeens, 7-Eleven, Dollar General and FedEx) were considered essential services and remained open. Only a small portion of tenants, including restaurants, movie theaters and fitness centers, had trouble.

In the darkest days of the pandemic, Realty still collected about 85% of rents, and that number rebounded to 93.6% by the end of 2020. Earnings and revenues actually increased for the year because of acquisitions. And now, the economy is roaring back.

The stock is still priced well below pre-pandemic levels while earnings are better. And O now has solid upward momentum.

Monthly-Paying REIT: STAG Industrial (STAG)

Yield 4.0%

STAG Industrial, Inc. (STAG) is a REIT that invests in single tenant industrial properties in the eastern and midwestern U.S. The property portfolio includes warehouses, distribution centers, and manufacturing facilities. It’s a diverse portfolio with 457 buildings in 45 different industries located in 38 states.

A couple of big things stand out about this stock. First, 43% of the properties are warehouses and distribution centers related to e-commerce. Those spaces are in huge demand and there isn’t enough supply to keep up. STAG is directly benefitting and will continue to benefit from the rise in e-commerce.

The other thing is that industrial properties are cyclical, which is good ahead of a booming economy, and in high demand. Industrial properties are getting a boost from the surge in manufacturing activity in the country, a trend that may just be beginning. There is also huge growth potential. The U.S. market for industrial properties is estimated to be $1 trillion. As of now, STAG only has about 0.5% of that market.

The stock has been a solid performer, performing on par with the overall market while providing a stellar monthly income. STAG is also in both a long- and a short-term uptrend.


Tom Hutchinson is the Chief Analyst of Cabot Dividend Investor, Cabot Income Advisor and Cabot Retirement Club. He is a Wall Street veteran with extensive experience in multiple areas of investing and finance.