For many investors, stocks that pay dividends represent the best of both worlds. A high-performing business can deliver share price appreciation, and in addition, shareholders get regular distributions. While most dividend-paying companies make those payouts quarterly, some distribute cash to shareholders every month.
When deciding which dividend-paying stocks to buy, investors should look for companies in sufficiently healthy financial shape that their dividends appear sustainable, and that look well-positioned to increase those payments over time. Here are two great businesses with reliable and growing dividends that investors should consider for their portfolios.
Realty Income
Realty Income (O -0.77%) takes its monthly dividend so seriously that it calls itself "The Monthly Dividend Company." The real estate investment trust (REIT) owns a diversified portfolio of properties all over the United States and internationally that it leases to tenants in a variety of industries. As a REIT, it is obligated to distribute at least 90% of its taxable income to its shareholders annually in the form of dividends. And Realty Income has also increased its payouts for 27 consecutive years.
Realty Income's stock is down by 12% over the past year, but that has helped push the dividend yield up to 5.8%. That dividend yield is significantly higher than the broad market's average yield of 1.35% and is even higher than most high-yield savings accounts, making it an attractive choice for investors seeking regular income.
The stock could also be a good choice for investors who want some ballast in their portfolio when economic times get tough. Realty Income estimates that approximately 90% of its rent comes from tenants with businesses that are resilient to economic downturns, and 73% of its portfolio is leased to companies in non-discretionary, low price point, and/or service-oriented retail.
EPR Properties
Another monthly-dividend-paying REIT to consider is EPR Properties (EPR -0.57%), which owns real estate in the experiential and education space. It uses long-term triple-net leases that make its tenants responsible for all the operating expenses for the properties they occupy. About 93% of EPR's properties are leased to tenants in the experiential category, which includes movie theaters, amusement parks, and eat-and-play businesses like Top Golf.
EPR Properties has had a rough few years, but it seems to have turned the corner recently. The pandemic had an obvious negative impact on it as many of its tenants had to close temporarily, and one of its largest movie theater tenants had to file for bankruptcy. EPR suspended its dividend in the spring of 2020, but reinstated it at a lower level in December 2021. At the current share price, it yields 8.1%.
Management has stated its desire to further diversify its portfolio to reduce the company's exposure to the movie theater segment. In Q1 2024, theaters provided 37% of EPR's annualized adjusted earnings, down from 41% in Q1 2023. During the first quarter, EPR purchased an attraction property and land for two eat-and-play developments. The company expects to spend an additional $220 million over the next two years to further diversify its portfolio.
The bottom line for investors
Both Realty and EPR Properties deliver reliable, monthly dividends to shareholders while also supplying exposure to real estate. Neither will provide the rapid share price growth that can be found in other sectors of the stock market, but their dividend yields will make them a compelling option for many investors.
