Better High Yield Monthly Dividend Stock: Realty Income vs LTC Properties

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Reuben Gregg Brewer, The Motley Fool

Wed, Feb 19, 2025, 3:05 AM 4 min read

LTC Properties (NYSE: LTC) and Realty Income (NYSE: O) are real estate investment trusts (REITs) that pay dividends monthly. Both have impressive dividend records, in their own way. But most income focused investors will probably find one of these two REITs more attractive. Here's the stock that's the better high yield monthly dividend choice and why.

What does LTC Properties do?

LTC Properties' name is more descriptive than you'd think because LTC stands for long term care. This REIT has a focus on healthcare properties that house older adults, including assisted living centers (roughly 45% of the business) and skilled nursing properties (55%). Senior housing is an interesting sector because of the aging population, which suggests that demand for such properties will increase in the years ahead.

As noted, LTC Properties pays a monthly dividend. While some of its peers ended up cutting their dividends during the coronavirus pandemic, when lessees were under severe financial strain, LTC Properties did not. It has maintained its dividend at $0.19 per share per month ($0.57 per quarter) since it rose to that level more than five years ago. That is an incredible amount of resilience, particularly noting that the company's roughly $1.5 billion market cap makes it one of the smaller healthcare REITs.

What does Realty Income do?

Realty Income is a net-lease REIT, which means that it owns single-tenant properties for which the tenants are responsible for most property-level operating costs. It is focused on retail assets, which make up nearly 75% of its business. The rest is spread across industrial and a collection of unique properties, including casinos, vineyards, and data centers. In addition, the company owns assets in North America and Europe. It is one of the more diversified REITs you can buy.

On the dividend front, Realty Income is a particular standout. It has increased its dividend for 30 consecutive years. Within that streak is a run of 108 quarterly dividend increases. And, of course, the dividend is paid monthly, the same payment plan that is used by LTC Properties. That said, one of the standout features of Realty Income is its size, being that it is the largest net-lease REIT you can buy with a huge $47 billion market cap.

What is the yield worth to you?

This is where things get interesting on the dividend front. Realty Income and its growing dividend is currently offering a yield of around 5.8%. LTC Properties' yield is 6.7%, almost a full percentage point higher. That's not a small difference, with LTC Properties' dividend providing roughly 15% more income. If you are trying to maximize the income your portfolio generates it could make sense to buy LTC Properties.

LTC Dividend Per Share (Quarterly) Chart — LTC Dividend Per Share (Quarterly) data by YCharts

And yet there's the dividend growth to consider. As the chart above shows, Realty Income's dividend has grown nearly 40% over the past decade compared to just over 10% for LTC Properties. But LTC Properties' dividend has gone nowhere since 2017. Note that the pandemic was in 2020, so LTC Properties' dividend was stagnant well before COVID hit.

Clearly, if you believe dividend growth is important, Realty Income should be your choice. The key is to think about what you are giving up if you opt for the higher yield because, given enough time, Realty Income's dividend growth will close the income gap and eventually end up providing more income.

Realty Income should be the choice for most investors

If you are looking for a healthcare REIT you obviously won't opt for retail focused Realty Income. But if what you want is a high yield, monthly pay dividend stock, Realty Income's dividend growth gives it an edge on LTC Properties even though Realty Income has a lower starting yield. Unless you have a very short time horizon, you'll likely be much better off with Realty Income.

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Reuben Gregg Brewer has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.

Better High Yield Monthly Dividend Stock: Realty Income vs LTC Properties was originally published by The Motley Fool

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