Three High-Yield Dividend Shares May Offer You a Generous Monthly Source of Passive Income by 2025
Three High-Yield Dividend Shares May Offer You a Generous Monthly Source of Passive Income by 2025
Many businesses distribute dividends on a quarterly basis, which coincides with their financial reports. This arrangement, however, often clashes with expenses, a significant portion of which are typically incurred monthly. Consequently, individuals relying on passive income, such as retirees, frequently need to devise innovative methods to coordinate their income with their expenditures.
Fortunately, some enterprises opt for monthly dividend distributions. Moreover, a handful of these firms offer high-yielding dividends, making them stellar investments for passive income generation.
Three such high-yielding monthly dividend stocks include AGNC Investment (AGNC, -0.86%), EPR Properties (EPR, 0.71%), and Realty Income (O, 0.13%). Let's delve deeper into these lucrative passive income investments.
A high-income behemoth
AGNC Investment boasts an impressive dividend. The real estate investment trust (REIT) boasts an astounding 15.5% yield, significantly surpassing the S&P 500's dividend yield (approximately 1.2%).
The mortgage REIT focuses on investing in mortgage-backed securities (MBSes) guaranteed against credit loss by government agencies such as Fannie Mae and Freddie Mac. This strategy secures a low-risk investment, though it typically yields low to mid-single-digit returns.
AGNC Investment enhances its earning potential through leverage, borrowing money to purchase more MBSes. This strategy can be highly lucrative, provided the REIT's returns meet or surpass its cost and dividend payments. Since 2016, AGNC has paid a monthly dividend without interruption. Although this leveraged MBS strategy carries risks (such as substantial interest rate changes and market swings affecting returns), it currently permits AGNC to pay a lucrative monthly dividend.
Steady income growth ahead
EPR Properties is a REIT specializing in experiential real estate, such as movie theaters and attractions. It leases these properties to operating companies on long-term leases, generating a stable income stream for dividend distributions. Currently, EPR's monthly payout yields 7.9%.
The company's income from rent covers its dividend with a comfortable margin. EPR utilizes the surplus cash and its financial flexibility to invest in new experiential real estate properties. In 2023, it is projected to invest between $225 million and $275 million in new projects. Additionally, it has $150 million worth of experiential development and redevelopment projects slated for funding within the next two years. Consequently, EPR sees a market opportunity valued at over $100 billion for experiential real estate investment.
EPR expects a combination of rental income growth and new investments to increment FFO per share by 3% to 4% annually. This should facilitate a comparable rise in its dividend (a 3.6% increase this year) and provide investors with a steadily growing passive income stream exceeding inflation rates in the future.
The Monthly Dividend Company
Realty Income's goal is to provide dependable monthly dividends to its investors, increasing over time. Dedicated to this objective, it is known as The Monthly Dividend Company.
The diversified REIT (retail, industrial, and casino properties) has consistently delivered its monthly dividend throughout its history, totaling 654 consecutive payments. It has increased its dividend 128 times since going public in 1994, including 109 consecutive quarterly dividend boosts and 30 consecutive years of dividend growth. Realty Income has hiked its payout at a 4.3% compound annual rate since debuting in public markets three decades ago. Currently, it yields approximately 6%.
Realty Income possesses strong financial standing to further grow its dividend. It retains significant cash following dividend payments, enabling it to invest in income-generating projects. Moreover, it boasts one of the strongest balance sheets in the REIT sector, providing it with ample financial flexibility to benefit from the multitrillion-dollar commercial real estate market.
Investors seeking high-yielding monthly dividends might find AGNC Investment appealing, as its 15.5% yield exceeds the S&P 500's dividend yield. This real estate investment trust (REIT) invests in mortgage-backed securities (MBSes) guaranteed by government agencies, securing a low-risk investment while leveraging borrowed money to increase earnings potential.
EPR Properties, with a steady income stream from renting experiential properties like movie theaters, offers a 7.9% monthly dividend yield. The company invests in new projects and expects a 3% to 4% annual increase in FFO per share and a comparable rise in its dividend, providing investors with a passive income stream that surpasses inflation rates.