5 REITs That Pay Me More Than $1,000 Per Month Combined

Over the past 2 years, REIT share prices have crashed even as most of them kept growing their cash flow and increasing their dividends.

As a result, REIT dividend yields are now historically high.

It is not uncommon to find good REITs yielding around 8% and many of them pay you on a monthly basis.

Therefore, it is today a lot more attainable than it was just a few years ago to build sizable income streams from REIT investments.

In today’s article, I want to highlight 5 high-yielding REITs that pay me over $1,000 every month.

Their average blended dividend yield is ~7% and they all pay on a monthly basis. What this means is that you can expect to earn $1,000 per month from these REITs if you invest about $170,000 in them.

EPR Properties (EPR)

EPR Properties is an investment-grade rated REIT that specializes in experiential net lease properties such as golf complexes, water parks, movie theaters, and ski resorts:

Most of its investments are what we call triple net lease investments. Such properties are different from traditional real estate investments in that their leases are structured in a way that’s highly favorable to the landlord:

• The lease terms are very long at over 10 years.
• The rents are automatically hiked by about 2% each year, regardless of economic conditions.
• The tenant is responsible for all property expenses, including even the maintenance.

Therefore, this is typically a very reliable business that generates highly consistent and predictable cash flow. The biggest net lease REIT in the world, Realty Income (O), has managed to grow its dividend for nearly 30 years in a row, even despite the great financial crisis, the pandemic, and many other crises.

But EPR is heavily discounted and trades today at just 8.4x its cash flow and offers a 7.7% dividend yield.

The reason why its valuation is so low is because it suffered a lot from the pandemic and to this day, it still hurts its market sentiment. The pandemic was the worst possible crisis for experiential properties because they couldn’t operate profitably with all the restrictions and many had to temporarily shut down, causing EPR to miss many rent payments.

But the good news is that we have long moved past the pandemic and EPR’s cash flow has recovered to its pre-pandemic levels. Even its weakest properties, which are the movie theaters, have strongly recovered and their rent coverage ratios are now at levels similar to 2019. The rest of the portfolio is doing even better so their overall rent coverage ratios are now far above pre-pandemic levels.

The market appears to fear that EPR would suffer if we go into a recession, but as we noted earlier, EPR is a triple net lease landlord, and its rent will keep on growing regardless. Today, its leases are 12 years long on average, include 2% annual rent hikes, and the strong rent coverage ratios provide good margin for safety.

The ~8% monthly dividend yield is well covered with a low ~70% payout ratio, which leaves EPR a lot of cash flow to reinvest in growth and acquire additional properties. Therefore, we think that the dividend is safe, and even expect it to grow in the coming years.

And as EPR keeps proving the market wrong and interest rates eventually return to lower levels, we expect the stock to reprice at closer to a 6% dividend yield, unlocking ~30% upside to shareholders.

Northview Residential REIT is a brand-new REIT that pays a monthly 7.8% dividend yield.

It owns mostly apartment communities in smaller secondary markets in Canada and it offers such a high yield because it is today priced at a steep 35% discount relative to its net asset value.

That’s the lowest valuation of any Canadian apartment REIT.

We think that there are two reasons for this discount.

Firstly, the REIT is more heavily leveraged than its peers and it is causing the market to worry due to the recent surge in interest rates. Its LTV seems particularly high at 65%. But it is important to note here that the LTV is so high largely because Northview Residential REIT focuses on higher-cap rate properties in secondary markets. Its leverage based on its cash flow is actually quite similar to that of its peers. Moreover, the REIT retains about 30% of its cash flow to gradually pay off debt and its rents are rising. Therefore, we think that the debt is manageable and the cuts to interest rates will also help them.

The second reason is that until recently, Northview Residential REIT was a much smaller, externally managed CEF that was overleveraged and paid an unsustainable dividend that put the company at risk. Understandably, there was little interest in that. But the company then went through a transformation. It internalized the management, restructured as a REIT, and went through a recapitalization transaction that massively increased its scale, lowered its leverage, and rightsized its dividend.

The market appears to have missed this transformation and as a result, it continues to trade at a very low valuation and a high dividend yield.

It will take time for perceptions to change, but as the REIT keeps deleveraging its balance sheet, we expect it to eventually reprice at closer to its NAV like its peers and this has the potential of unlocking 30-50% upside from here.

While you wait, you earn a near 8% dividend yield that’s well covered and paid monthly.

Gladstone Commercial Series O Preferred Shares (GOODO)

Gladstone Commercial is a small net lease REIT that owns mostly industrial properties:

The REIT is today discounted and offers good value for investors but there are three reasons why I am not interested in the common equity:

1) The REIT is externally managed, which can be a source of conflicts of interest. The management has a good track record and they have a lot of skin in the game, which does a good job of aligning their interest, but I still would prefer them to be internally managed.

2) They generate about ~35% of their revenue from single-tenant office buildings, and the net asset value of these properties has dropped significantly in recent years and will remain challenged in my opinion.

3) In light of that, their leverage is a bit too high for me to feel comfortable owning the common equity.

However, I think that the preferred equity of the REIT is interesting because it is today priced at a 23% discount to its par value, and offers a 7.8% dividend yield that’s paid on a monthly basis.

The market has heavily discounted both, the common and the preferred, but I think that the preferred is fine. It is senior to the common and there is substantial buffer/margin of safety in the common equity to absorb potential losses.

I think that the preferred dividend is safe and there could be some upside as the REIT keeps deleveraging its balance sheet, selling office assets, and interest rates return to lower levels.

This is the lowest-yielding REIT on this list, offering a 4.5% dividend yield, but the yield is only so low because they own lower cap rate / faster-growing assets, and retain nearly 40% of their cash flow to buy back shares.

BSR is an apartment REIT and it is unique in that it is almost entirely invested in the Texan triangle:

These markets are today facing some oversupply, which is causing their rents to stagnate, but historically, these markets have done very well and we expect strong rent growth to continue over the long run because rent-to-income ratios remain very low relative to nationwide averages and these markets are attracting a lot of people.

Despite that, the stock is today priced at a near 40% discount to their net asset value due to the near-term challenges, and the management is busy buying back shares at these low levels to create value for long-term oriented shareholders.

The 4.6% dividend yield is paid monthly and it has historically often been classified as “return of capital” which is more tax-efficient for shareholders.

The last monthly paying REIT that I want to highlight is called Canadian Net REIT.

It is essentially a tiny version of Realty Income that operates in Canada.

It has built a portfolio of net lease properties that focus on defensive categories like grocery, convenience stores, and quick-service restaurants.

Most of its tenants are investment grade rated and it enjoys CPI rent adjustments in its leases.

What’s more, the REIT has one of the best track records of any REIT, having managed to grow its FFO per share and dividend per share at a very fast pace:

Despite that, the stock is today discounted and trades at just 8x FFO and offers a 6.7% monthly dividend yield that we believe to be sustainable.

The payout ratio is just 54%, leaving plenty of cash flow for the REIT to reinvest in buying more properties and its rents keep on growing as well.

Closing Note

The REIT market is today full of high-yielding opportunities because their share prices have crashed even as most REITs kept growing their dividends.

Even better, a lot of our REITs pay us on a monthly basis.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.