Passive income can help get you on the road to financial freedom. As you grow your passive income sources, you'll become less reliant on your job to support your lifestyle.
Investing in real estate investment trusts (REITs) can be a great way to start building your passive income. Several REITs offer high-yielding dividends that they pay monthly, making them ideally suited for generating recurring income. For example, $5,000 invested across a trio of monthly dividend REITs could produce nearly $275 of dividend income per year (almost $23 each month):
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Monthly Dividend Stock
Investment
Current Yield
Annual Dividend Income
EPR Properties (NYSE: EPR)
$1,666.67
7.65%
$127.50
Stag Industrial (NYSE: STAG)
$1,666.67
4.07%
$67.83
Gladstone Land (NASDAQ: LAND)
$1,666.67
4.73%
$78.83
Total
$5,000.00
5.48%
$274.17
Data source: Google Finance. Table by author.
That income stream should grow as these REITs increase their dividends.
Your ticket to a lucrative monthly income stream
EPR Properties is a specialty REIT focused on owning experiential properties like movie theaters, eat-and-play venues, and attractions. The REIT leases these properties to tenants that operate the experiences. It typically gets paid a stable base rental rate and, in some cases, gets a cut of the property's revenue.
The company is on track to generate $4.80-$4.92 per share of funds from operations (FFO) as adjusted this year. That's plenty of cash flow to cover its monthly dividend payment of $0.285 per share ($3.42 annualized). EPR Properties retains the excess cash to fund new income-generating experiential property investments. It will invest $225 million to $275 million into new properties this year, which includes development and redevelopment projects.
The REIT expects new property investments to grow its FFO per share by around a 3% to 4% annual rate. That should enable it to increase its dividend by about a similar rate (it raised its payout by 3.6% this year).
Multiple growth drivers
Stag Industrial is an industrial REIT that owns warehouse and light manufacturing facilities. The company leases those properties to high-quality tenants under long-term contracts that escalate rents at a low-single-digit annual rate.
The REIT currently pays out about 73% of its stable rental income via its monthly dividend. That enables it to retain about $100 million each year to fund new investments. Stag Industrial also has a very strong balance sheet, giving it additional cash to fund new income-generating industrial real estate investments. The company expects to invest $500 million to $700 million into acquiring additional properties this year.
Demand for industrial real estate is robust these days due to the rising adoption of e-commerce and the onshoring of manufacturing. That's driving up rental rates for properties in the market. Stag Industrial is steadily capturing this market rent growth by signing new leases at higher market rates as legacy leases expire. The company has signed new and renewal leases at an average rental increase of about 30% this year compared to expiring rental rates.
Rising rents (contractual and market) and new property additions are growing the REIT's FFO per share. That's enabling it to steadily raise its dividend, which it has done every year since it came public in 2011.
Steady dividend growth
Gladstone Land is a farmland REIT. It owns farms leased to farmers at either a fixed rate or participation rental rate, where it gets a portion of the annual crop revenue.
The REIT routinely increases its monthly dividend (35 times over the last 39 quarters). The company grows its dividend by acquiring new farms. It also benefits from rent growth and rising crop income. For example, it recently renewed or amended eight leases of farms that grow annual row crops at an 11% higher rate compared to the prior lease rate.
Gladstone Land has experienced some setbacks over the past year due to the impact of lower crop prices on some tenants. It has had to take back 20 farms that are either currently vacant or that it now directly operates. It has also had to renegotiate some other leases at lower initial rental rates in exchange for greater participation in future crop revenue.
The company expects to work through these issues by the end of the year and should see higher revenue in the second half of 2025, when its farms harvest their crops. That should enable the REIT to continue growing its dividend in the future.
Ideal passive income producers
REITs are great passive income investments because they generate steady rental income that they distribute to investors. EPR Properties, Stag Industrial, and Gladstone Land pay attractive monthly dividends, making them ideal options for those seeking lots of recurring passive income.
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Matt DiLallo has positions in EPR Properties, Gladstone Land, and Stag Industrial. The Motley Fool recommends EPR Properties, Gladstone Land, and Stag Industrial. The Motley Fool has a disclosure policy.
