3 Top Monthly Dividend Stocks For 2023

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Most income-oriented investors look for stocks that will offer them a smooth and reliable income stream. Monthly dividend stocks pay their dividends on a monthly basis instead of a quarterly basis and thus they are appealing to some income-oriented investors. In this article, we will discuss the prospects of three monthly dividend stocks, namely Realty Income (O), SL Green Realty (SLG), and LTC Properties (LTC), which offer attractive dividends.

Realty Income

Realty Income is a retail REIT, with more than 4,000 properties. Some retail REITs have been severely hurt by the secular shift of consumers from traditional purchases to online shopping. However, this is not the case for Realty Income, which owns retail properties that are not part of a wider retail development, such as a mall. Its properties can attract several types of tenants and hence the REIT is essentially immune to the secular decline of brick-and-mortar retailers.

Moreover, Realty Income has exemplary management, which has great expertise in identifying high-return properties. Thanks to its strong business model, which involves material rent hikes year after year, and its high-quality management, Realty Income has exhibited an outstanding performance record. The trust has grown its FFO per unit every single year over the last decade, at a 6.4% average annual rate.

Even better, there are no signs of fatigue on the horizon. The REIT invested $2.1 billion in new properties in 2020 and $6.4 billion in 2021. As these two amounts comprise 20% of the current market capitalization of the stock, it is evident that management is heavily investing in future growth. It is also remarkable that Realty Income acquired its first properties in the UK in 2019 and has stated that it will expand more aggressively in international markets in the upcoming years.

Realty Income is expected to report a 9% increase in its FFO per unit for 2022. Thanks to its reliable growth trajectory, the REIT is likely to keep growing its bottom line meaningfully for many more years.

Realty Income also has an impressive dividend growth record, as it has grown its dividend for 100 consecutive quarters. Moreover, the stock is currently offering an attractive dividend yield of 4.4%, with a payout ratio of 76%. As the payout ratio lies at the lower end of the 10-year range of Realty Income, the dividend has a wide margin of safety, especially given the reliable growth trajectory of the REIT. Overall, investors can lock in an above-average dividend yield and rest assured that the dividend will remain on the rise for several more years.

SL Green Realty

SL Green Realty is a REIT that is focused on acquiring, managing, and maximizing the value of Manhattan commercial properties. It is Manhattan’s largest office landlord, with 61 buildings totaling 33 million square feet.

The merits of being the largest landlord in one of the most popular commercial areas in the world are obvious. SL Green Realty pursues growth by acquiring attractive properties and raising rental rates in its existing properties. It also signs multi-year contracts with its tenants in order to secure predictable cash flows. During the last decade, the REIT has grown its FFO per unit at a 2.9% average annual rate.

Unfortunately, SL Green Realty has been significantly affected by the coronavirus crisis, which has led many companies to adopt a work-from-home model. The pandemic has subsided thanks to the massive distribution of vaccines but employees have hardly returned to their offices. The occupancy of office space in most metropolitan areas, including Manhattan, remains close to all-time low levels. This business environment is especially friendly for tenants and thus SL Green Realty has been forced to offer significant concessions to them. This is the key factor behind the 45% plunge in the stock over the last 12 months.

On the other hand, SL Green Realty seems to have been punished by the market to the extreme. Some large companies, such as Apple (AAPL), Disney (DIS), and Morgan Stanley (MS), recently called their employees back to their offices. This trend is likely to remain in place in the upcoming years.

SL Green Realty is currently trading at a price-to-FFO ratio of 7.4, which is much lower than the 4-year average price-to-FFO ratio of 9.9 of the stock. In addition, the stock is offering a nearly 10-year high dividend yield of 7.8%, with a solid payout ratio of 59%. Therefore, while the REIT cut its dividend by 13% in the fourth quarter of 2022, the new dividend seems to have a wide margin of safety. Overall, SL Green Realty is highly attractive for investors who can ignore short-run pressure and remain focused in the long run.

LTC Properties

LTC Properties is a REIT that invests in senior housing and skilled nursing properties. Its portfolio consists of approximately 50% senior housing and 50% skilled nursing properties. The REIT owns 204 properties in 27 states with 30 operating partners.

LTC Properties was severely hurt by the pandemic, which exerted great pressure on some of the operators of the properties of the REIT. In the second quarter of 2022, the REIT incurred a 25% decrease in its FFO per unit due to this headwind. Senior Lifestyle, an operator of some properties, did not pay for its lease obligations during the quarter and thus took its toll on the results of the REIT.

On the other hand, LTC Properties has begun to recover from the downturn caused by the pandemic. In the third quarter, the REIT grew its FFO per unit 33% over the prior year's quarter, from $0.45 to $0.60, mostly thanks to higher rental income from properties that were transferred from operators with liquidity issues to healthy operators. The results were also helped by the acquisition of some properties. As the pandemic has subsided, the REIT can be reasonably expected to continue growing its FFO per unit in the upcoming years.

LTC Properties is currently offering a nearly 10-year high dividend yield of 6.0%. However, the trust has an elevated payout ratio of 91% and has paid the same dividend for six consecutive years due to the impact of the pandemic on its business and the liquidity issues of some of its operators. As a result, its dividend is likely to come under pressure whenever the REIT faces its next downturn. Overall, LTC Properties is reasonably valued, with a price-to-FFO ratio of 15.0, which is in line with the historical average, but the stock is suitable only for patient investors, who can endure stock price pressure for an extended period.

Final Thoughts

The above three monthly dividend stocks are attractive candidates for the portfolios of income-oriented investors. Realty Income is the most reliable, as it has proved resilient to recessions and has an impressive dividend growth record. SL Green Realty has been hurt by the work-from-home trend but it is exceptionally cheaply valued from a long-term perspective. LTC Properties has finally begun to turn around and is reasonably valued, though it is vulnerable to recessions.

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Disclaimer: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities. However, the publishers of Sure ...

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