realty income stock –

Real estate investment trusts, or REITs, can be a smart choice for investors. Even during the COVID-19 crisis, these trusts could produce dependable returns for investors. This TradingSim article will help investors find a trading strategy to invest in publicly traded REIT stocks. The article will also have a list of REIT stocks that are the top REIT stocks for investors.

What is a REIT?

A REIT is a company that owns or finances real estate that produces income. Real estate assets can include apartment and office buildings, hotels, and warehouses. Almost 87 million Americans already own REIT stocks through their 401K’s.

How does a company qualify as a REIT?

Companies can qualify as REITs if they meet certain criteria.

Invest 75% of assets in real estate.
Get 75% of income from real estate sales, interest on mortgages, or real estate sales.
Have at least 100 shareholders.
Pay 90% of dividends to investors every year.
Have a board of directors managing the trust.

How do REIT stocks make money?

REITs make profits with rents are paid on leased properties. The corporations pay 90% of their income to investors. They usually pay out monthly dividends to investors. Some of the REITs with the highest dividends pay 100% of their dividends to investors. Many REITs are more likely to be long-term investments.

What are the different types of REITs?

There are many types of REITs, including:

Equity REITs are publicly-traded trusts. They simply own or operate real estate that produces income.
Public non-listed REIT’s don’t trade on any stock exchange. However, they do have to register with the Securities and Exchange Commission(SEC).
Private REIT’s don’t trade on stock exchanges. They also don’t have to register with the SEC.
Mortgage REIT’s or REIT’s buy mortgages and mortgage-backed securities. These REITs buy mortgages to fund real estate that produces income.

How can REITs survive the economic downturn?

REITs perform well despite the current economic volatility. Jay Bernstein is a chairman at the Clifford Chance law that specializes in REITs. He noted that REIT’s aren’t as leveraged as other real estate stocks.

“[There’s] one thing I think is very positive for REITs right now,” said Bernstein. “REITs have been very moderately leveraged compared to other real property owners.”

Hoya Capital Real Estate officials noted in a recent report that REITs have better-than-expected balance sheets. The officials wrote that the last Great Recession of 2009 taught REIT’s important lessons about making strategic decisions to save money.

“Owing to the harsh lessons learned during the financial crisis, most REITs have been exceedingly conservative with their balance sheet and strategic decisions in the post-recession period,” said Hoya Capital officials said in the report.

“With the scars still visible enough to be daily reminders of more dismal times, REITs have been ‘preparing for winter’ for the last decade,” said Hoya Capital.

REITs have survived because the yields have been slow, but steady. The trusts persevered “perhaps to the frustration of yield-hungry investors that have turned to higher-leveraged and riskier alternatives in recent years,” added Hoya Capital.

REITs have been able to withstand the economic volatility because of the strategic decisions and stringent actions to keep positive balance sheets.

How can investors find the best REIT stocks?

Even in a bear market, investors can find profits in the top REIT stocks.

These are many ways that investors can find the top REITs for their portfolios.

David Leibowitz is a global markets strategist at JP Morgan Chase Asset Management. He believes that investing in REIT’s and buying real estate is about three things- location, location, location.

” It’s all going to be about location. The best investment opportunities will be in those places where the labor market is the least damaged,” said Lebovitz.

Conduct research on REITs

In addition to finding the right location for REITs, investors must conduct thorough research on REITs before investing in the trusts. Investors should decide if they want to focus on one of the many REIT sectors like retail, hotel, or healthcare trusts. Look at charts that track specific REIT’s on TradingSim or read TradingSim blog posts about REITs for information.

Understand the risks of investing in REITs

In addition to researching REITs, investors must understand the risk of REITs. The stocks can be a good form of passive income. However, they’re experiencing challenges in the current stock market. National Association of Real Estate Investment Trusts (Nariet) senior executive vice president Tony Edwards monitors REIT’s. He noted in a letter to the Treasury Department that the stocks had to reduce their dividend payouts to investors. The coronavirus crisis caused the current dividend reductions.

The COVID-19 crisis is also wreaking havoc on tenants. Tenants that are unable to pay rent because of job losses can also cause problems for REITs-and their investors. Edwards wrote about the concern in his letter to the Treasury Department.

“The current COVID-19 has significantly impacted all REITs, but most severely in the lodging, retail, and health care sectors. Many REITs have reduced their dividends because the rents they expect to receive are declining dramatically”, said Edwards.

Edwards noted that was “because of the restrictions put in place or suggested by federal and state at authorities”.

Investors should understand that there are risks as well as benefits when choosing REIT stocks.

Inspect a REIT’s balance sheet.

In addition to the overall risks of REITs, investors can monitor the stocks through five specific metrics.

Funds from operations. A REIT’s funds from operations are a better measure of a trust’s value than earnings per share. Funds from operations (FFO) are a more precise measurement than price-to-earnings ratios as well. FFO’s measure a trust’s generally accepted accounting principles (GAAP) net income and depreciation to measure the worth of REIT’s. The inclusion of depreciation offers investors a more complete look at a REITs cash flow.
Adjusted funds from operations. Adjusted funds from operations (AFFO) doesn’t have an exact formula to measure a REITs worth. AFFO is mostly calculated when FFO is subtracted from capital expenditures.
Debt/EBITDA Ratio. A REITs debt/EBITDA ( earnings before interest, taxation, depreciation, and amortization) ratio is important to credit agencies and investors. The trusts must have a low amount of debt to increase their credit ratings and potential growth. A good debt/EBITDA ratio is usually less than 6:1.
Credit rating. An analysis of a REITs credit rating is another way to determine if it’s saddled with too much debt. A Standard and Poor rating of BBB- and higher is considered a good credit rating.
Occupancy rate. An empty building is not a good sign for a REIT. An occupancy rate of 90% or better is an encouraging sign that a REIT is in good standing.

Data center and retail REIT’s can be advantageous to traders

The list of REIT stocks in this article mostly contains REITs that have data center and multi-tenant properties. Many of these properties are in the fast-growing field of technology. The data center REITs are in wireless technology, an essential need for consumers.

Though retail REITs may be struggling, they are still attractive for investors if they choose the right one. Just as data centers are on the edge of technology, retail REITs that have warehouses for online shopping items are necessary as well. Trusts that heavily use technology can lead to investors to pick the top REIT stocks.

Diversify investments in REIT’s

Even though specific REITs may pay off for investors and are all in real estate, there are still many different types of trusts.

Leibovitz noted that investing in REIT’s and real estate could broaden an investor’s portfolio.

“We still see value in direct real estate as a source of income, and more broadly, as a portfolio diversifier,” said Leibovitz.

“We believe it is about combining REITs and direct real estate, particularly given that REITs provide greater exposure to more forward-looking sectors,” added Leibovitz.

Marijuana REITs an option for investors

In addition to traditional REITs, marijuana REITs are a growing sector of the REIT industry. The legalization of pot in many states has led to a boom in investment in marijuana stocks and REITs.

Innovative Industrial Properties (NYSE:IIP) is a real estate company that invests in medical marijuana properties. In Q1 2020, Innovative Industrial Properties posted revenue of $21.1 million. That’s a whopping 210% increase from 2019’s first-quarter revenue.

Alan Gold, executive chairman of Innovative Industrial Properties, noted that IIP’s strength is in its strong balance sheet.

“One of the pillars of our business strategy has consistently been a conservative, flexible balance sheet,” said Gold.

Diverse REITs can help portfolios

Gold also believes that marijuana REITs like Innovative Industrial Properties can overcome economic instability and continue to grow.

“We believe we are exceptionally well-positioned to not only weather this unprecedented health crisis and economic disruption, but to continue to make real estate investments on a long-term basis with best-in-class tenant operators,” said Gold.

Diversified REIT investments can help investors minimize risk when they choose the top REIT stocks.

Investors can research REIT’s, analyze their balance sheets, and make diversified investments to pick the top REIT stocks.

What kind of investors should pick REITs?

While there is no one type of investor for REITs, there are some key qualities. REITs aren’t high-action, fast- moving investments like Tesla (NYSE:TSLA), so they may be best for passive investors. Investors that don’t want to spend too much time checking on the ups and downs of stocks can invest in REITs for a more hands-off approach to investing.

REITs can be low-risk because most of the tenants take on most of the responsibilities of maintenance and taxes. They are triple instead of the REIT themselves.

Investors that care about dividends can also depend on the top REIT stocks. Many of the best REIT stocks offer reliable monthly dividend payouts to investors.

What are the 10 best REITs for investors?

These are top REIT stocks for investors looking for real estate investments. The list of REIT stocks presents some of the best options for first-time or even expert investors in these trusts.

1. Realty Income

Realty Income (NYSE: O) is one of the best REIT stocks. For over 50 years, the corporation stakes its reputation on being the “monthly dividend company.”

The dividend payout to investors is 5.3%. Realty Income’s dividend reliably increases every year. The payout is so consistent that Realty Income is called a “dividend aristocrat.”

Realty has 6500 properties under long-term leases. While many retail clients are suffering, many of Realty’s retail clients are thriving essential businesses like grocery stores.

Walgreens (NASDAQ: WBA) and Walmart (NYSE:WMT) are necessary stores that provide much-needed services like medicine and groceries to people in quarantine. Because many retail tenants are essential services, several tenants are still able to pay their rents to Realty Income.

Realty Income a top REIT with latest earnings report

Realty Income’s last earnings report showed the perseverance of the REIT. The company’s Q1 revenue totaled $414.34 million. The revenue is a double-digit 16.9% surge from Q1 2019.

Sumit Roy, Realty Income’s CEO, commented on Realty Income’s success.

“We continued the positive momentum into a strong first quarter of 2020, investing $486 million in property acquisitions and ending the quarter well-positioned with a modest net debt to EBITDA ratio of 5.0x and a fixed charge coverage ratio of 5.5x, which represents an all-time high,” said Roy.

Realty Income is one of the best REIT stocks for traders who want to invest in a steady option for dividends and growth.

2.Prologis

The REIT Prologis (NYSE:PLD) is a corporation that owns 797 million square feet of warehouse space that holds e-commerce orders. The company is one REIT that’s benefiting from the growth in e-commerce. Amazon (NASDAQ:AMZN) is one of Prologis’ biggest tenants. Amazon’s profits have only grown since the COVID-19 crisis and Prologic has performed well.

Prologis’ Q1 2020 revenue of $878.81 million, topping the Q1 2019 total of $696.81 million. The corporation also had $2.1 trillion worth of goods move through its warehouses last year as well. The company’s dividend yield is 2.9%.

Chief Executive Officer Hamid Moghadam commented that despite the economic slowdown, Prologis tenants like Amazon and Walmart (NYSE:WMT) are seeking more warehouse space. They are clamoring for more warehouse space to meet growing customer demand of online shoppers.

“We’re not seeing those guys slow down, they continue to be very active in making new deals,” said Moghadam. “The strong continue to be taking a lot of space.”

Prologis Q1 2020 revenue strong

On the strength of e-commerce warehouse space, Prologis’ Q1 2020 earnings report was positive. Prologis’ CEO, Hamid R. Moghadam, touted the company’s results.

“Our strong first- quarter operating performance is a result of our long-term focus on the world’s top consumption markets. While the current environment is challenging, we are well-prepared. We have confidence in our team, our strategy and in the strength of our portfolio,” said Moghadam.

Even though Prologis stock fell 0.7% since 2020 started, there’s still some good news. However, that’s far less than the S&P 500’s tumble of 12.6%. Prologis is one of the best REIT stocks for investors looking for a stable stock with growth in e-commerce.

3. QTS Realty Trust

QTS Realty Trust(NYSE:QTS) is the owner of multi-tenant data centers. The REIT has been invaluable because data centers enable online shopping, working from home, and streaming video in this quarantine era.

QTS has upgraded bandwidth space by an incredible 700% since March to accommodate people using the internet. Jon Greaves, QTS chief technology officer, spoke about the importance of tech and data centers.

“Working remotely is a new challenge and opportunity that many in Corporate America are currently facing. The Internet and online workplace are now mission-critical in our daily lives,” QTS chief technology officer Jon Greaves said in a news release.

Even though QTS stock is down 6% this month, Bank of America analysts feel REIT’s like QTS are recession-proof because of its data center real estate.

“There is no evidence of correlation between gross domestic product growth and data center leasing activity,” wrote Bank of America analysts. “Data centers are necessary for corporate and internet continuity.”

Data center ownership was beneficial for QTS in its last quarter. QTS had a strong Q1 2020, as CEO Chad Williams noted.

“QTS generated total revenue and adjusted EBITDA of approximately $126 million and $67 million respectively, representing a year-over-year growth of approximately 12% and 13.5% respectively,” said Williams.

With a 4% yield, QTS is one of the REIT’s with the highest dividend payouts among REIT’s. QTS Realty Trust is performing well with customers’ extra dependence on data centers.

4. Iron Mountain

Another REIT that’s beating the economic crisis is Iron Mountain. It’s a REIT with the highest dividend of almost 10%. The corporation has old-school paper document storage, but is still surviving the economic roller coaster. Iron Mountain revenue for the first quarter in 2020 was $1.07 billion, compared with $1.05 billion in Q1 2019. In its last Q1 2020 earnings report, CEO William Meaney touted the company’s results.

“We delivered very strong performance in the first quarter, with year-over-year growth in organic revenue, Adjusted EBITDA, Adjusted EPS and AFFO. Importantly, the swift and decisive actions we executed in Q4 as part of Project Summit delivered Adjusted EBITDA benefits above our expectations,” said Meaney.

Wide range of services help Iron Mountain

In addition to paper storage, Iron Mountain stores many different types of products. During the COVID-19 crisis, Iron Mountain stored and distributed personal protective equipment to frontline hospital workers. Even though the business has paper storage, Iron Mountain also has a robust data center division as well. Meaney spoke about the data center growth in Iron Mountain’s last earnings report.

“Our core Global Records and Information Management business continues to demonstrate durability, with organic storage rental revenue growth of 2.1%”, said Meaney.

With diversified interests and a robust balance sheet, Iron Mountain is a top REIT stock.

5. STORE Capital

One of the REITs with the highest dividends is STORE Capital(NYSE:STOR). STORE Capital’s stock has a 8.6% yield, an above-average payout to investors.

STORE (Single Tenant Operational Real Estate) Capital is such a solid REIT that investing expert Warren Buffett invested in STORE in 2017. Buffett’s Berkshore Hathaway firm invested $317 million in the corporation in 2017.

At the time, STORE Capital CEO Christopher Volk praised the partnership of Berkshire Hathaway and STORE.

“Berkshire Hathaway’s investment solidly positions STORE for continued growth, while adding measurably to our already strong financial position,” said Volk.

“An investment in our company from one of history’s most admired investors represents a vote of confidence in our experienced leadership team and an affirmation of our profit-center real estate investment and management approach,” added Volk.

STORE Capital a top REIT stock in COVID-19 era

STORE is a REIT that leases to retail tenants. Many retail tenants are suffering in this new recession. However, STORE can withstand the economic downturn for a few reasons. STORE’s properties are single-tenant and the tenants are mostly responsible for the properties’ costs.

The REIT doesn’t risk as much capital if the tenants are responsible for costs. STORE is also partially insulated from economic instability because there are annual rent increases built into the leases the tenants have with STORE.

In its last earnings report, STORE chief financial officer, Catherine Long, noted that STORE’s profits grew in its Q1 2020 earnings report.

“First-quarter revenues increased 14% from the year-ago quarter to $178 million, and the annualized base rent and interest generated by our portfolio in place at March 31 was $730 million, an increase of 13% from a year ago,” said Long.

Long also spoke about the increase in STORE’s AFFO in the last quarter as well.

“AFFO increased over 11% to $120 million from $108 million a year ago,” said Long.

A strong earnings report and a recent 10% jump in its stock price make STORE one of the best REIT stocks.

6. Public Storage

Public Storage (NYSE:PSA) is one of the top REITs for investors new to REITs. It’s one of the most well-known real estate trust stocks. The REIT has about 2300 properties in almost 40 states.

Public Storage also pays an attractive 4% yield to investors. The corporation has seemed to survive the economic downturn.

Public Storage appears to be recession-proof

Ironically, the current recession can be good business news for Public Storage. When people downsize from larger houses to smaller ones, they often need Public Storage facilities to store their excess items.

In its last Q1 2020 earnings report, Public Storage reported $716.1 million in revenue. That figure was a 3.9% year-over-year increase. The corporation benefitted from increased rents.

Tom Boyle, Public Storage’s chief financial officer, spoke about the company’s positive balance sheet in its Q1 2020 earnings report.

“Yes, the balance sheet’s in great shape, as we’ve discussed on previous quarterly calls. And we’re sitting right now with debt-to-EBITDA, just to touch over 1 times fixed charge coverage around 8 times and over $700 million in cash on the balance sheet,” said Boyle.

Boyle also spoke about Public Storage’s strong liquidity if it wants to purchase more properties in the future.

“So we feel very good about our financial and liquidity position to take advantage of potential opportunity, should it arise, “added Boyle.

Public Storage moves rentals online

Public Storage has also managed to evolve its business beyond physical buildings. Boyle spoke about the company’s available online services to store their items.

“So for those customers that have a storage need, we’re providing space with enhanced precautions in our properties and utilizing our e-rental online lease, somewhat encouraging. Over 80% of last year’s seasonal activity we experienced in April, which speaks to demand for the product even in tough times,” said Boyle.

Public Storage has survived the economic turmoil by having built-in annualized raised rents. The corporation has also grown with its online strategy as well to be one of the best REIT stocks.

7. Equinix

Equinix (NASDAQ:EQIX) is a data center REIT that is performing well during the coronavirus crisis. The company has 205 data centers in 25 countries. The stock is showing resilience in this shelter-in-place time.

Equinix expands with Zoom partnership

The corporation just entered a partnership with Zoom (NASDAQ:ZM). The videoconferencing company has been booming with many people working from home. Zoom use Equinix data center vendors for its capacity. The increase in data usage has helped Equinix have a Q1 2020 revenue of $1.445 billion, a 6% year-to-year increase. The revenue is also a jump of 2% from Q4 2019.

Charles Myers, CEO of Equinix, spoke about Equinix’s first-quarter success.

“The Equinix business continues to perform well and show resiliency through these times of uncertainty, enabling us to remain focused on the clear set of priorities we laid out at the beginning of the year investing in our people,” said Myers.

Myers also touted how Equinix is “evolving our platform and service portfolio to meet the changing needs of customers, expanding our go-to-market engine to fuel long-term growth, and simplifying our business to drive operating leverage and enhance our customer experience”.

Equinix expands with $1 billion data center deal

In addition to evolving its business model, Equinix is partnering with Singapore firm GIC. They are partnering up in a $1 billion joint venture to build data denters in Japan.

Jim Smith is managing director for hyperscale business at Equinix. He said the acquisition of the buildings will accommodate more customers.

“The cloud customers are super good at efficiency. The physical building might be the same size, but you may have two to three times the energy density, which means more generators, more uninterruptible power supplies, more cooling equipment on the roof,” said Smith.

Equinix has a 1.56% dividend yield and has some of the biggest companies in the world like Zoom and Amazon (NASDAQ:AMZN) using its data centers. With its strong revenue report and expansion, Equinix is a top REIT stock.

8. American Tower Corp

American Tower Corp(NYSE: AMT) is another top REIT stock. The communications company has a strong track record amid the current economic climate.

American Tower Corp owns 180,000 around the globe. American Tower has 41,000 communications and wireless towers in the US alone. The company had a better-than-expected Q1 earnings report with $1.97 billion in revenue. The REIT’s CEO Tom Bartlett spoke about American Tower Corp’s positive balance sheet.

“So our strong and kind of consistent adjusted EBITDA margins, north of 63%, are consistent double-digit revenue growth and the fact that our return on invested capital was north of 11%,” said Bartlett.

” That strength in the core underlying business, combined with our very strong balance sheet, again, the liquidity position that we’re in at $5.2 billion and pretty low cost of debt at 3.1%,” added Bartlett.

Analysts bullish on American Tower Corp stock

American Tower Corp’s reliable dividend yield of 1.71% and strong earnings report make the corporation one of the best REIT stocks for financial analysts.

Jennifer Fritzsche is an analyst at Wells Fargo that monitors communications REIT’s. She and other Wells Fargo analysts wrote a note to investors about American Tower. The analysts believe the predictability of the long-term tower leases make American Tower Corp recession-proof.

“This predictability of the tower model (with 95% of its revenue recurring and under long term contracts) is a comforting (and beautiful) thing in times of macro-economic pressure,” wrote Jennifer Fritzsche and other Wells Fargo analysts.

MoffettNathanson’s Nick Del Deo also monitors telecom REIT’s like American Tower. He wrote in a note to investors that American Tower can withstand the current worldwide economic instability. The delay in 5G technology rollouts is temporarily impacting American Tower’s properties.

“While too soon to say that American Tower will exit this crisis completely unscathed, FX[foreign exchange] aside, there’s currently no reason to think there will be dramatic long term damage to its results as a result of the pandemic,” wrote Del Deo in a note.

American Tower is a publicly-traded REIT that can be a good choice for investors.

9. Digital Realty Trust

Digital Realty Trust( NYSE: DLR) is a data center REIT that is another top REIT stock. The company has an impressive yield of 3%. Similar to the aforementioned Equinix, Digital Realty has many large corporations as clients. Facebook (NASDAQ:FB), Uber (NASDAQ: UBER), and Oracle( NASDAQ:ORCL).

As the COVID-19 crisis started, Digital Realty has prepared for the pandemic. Digital Realty CEO Bill Stein spoke about the company’s preparations.

“We have long prepared for the possibility of a pandemic within our overall business continuity plan to ensure we can maintain this service level,” said Stein.

Stein also noted how data center REIT’s can be successful independent of the slowing global economy.

“As we are all aware, the global economy has ground to a halt,” Stein said. “As you’ve heard me say many times before, data center demand is not directly correlated to job growth, and we are fortunate to be operating in a business levered to secular demand drivers, both growing faster than global GDP growth and somewhat insulated from economic volatility.”

Digital Realty looks to future with wind energy

In addition to owning data centers, Digital Realty is preparing to make them more environmentally sustainable to lower costs. The wind power is expected to provide 260,000 kilowatts of green energy to its Dallas data centers. Stein touted the venture to reduce costs and help the environment.

“We’ve more than doubled our renewable energy sourcing over the past two years and last year our renewable energy efforts avoided 500,000 metric tons of carbon emissions, which is equivalent to taking over 100,000 cars off the road each year,” said Stein.

Digital Realty Q1 2020 earnings beat expectations

In addition to investments in green energy, Digital Realty had success in its last quarter with its existing properties.

Digital Realty had a Q1 2020 net income of $229 million, a 5% increase from last year. The corporation also generated a first-quarter 2020 adjusted EBITDA of $482 million. That’s a 1% growth from Q1 2019.

Stein also noted that the company’s real estate bookings surged as well in Q1 2020.

“Despite the challenging environment, we continued to execute on our strategic plan, closing our highly strategic combination with Interxion as well as the acquisition of the Westin Building in Seattle while delivering another quarter of solid bookings,” said Stein.

“We delivered solid leasing volume with balanced performance across sectors, products, and geographies. We signed total bookings of $75 million, our second-highest quarter on record,” added Stein.

Digital Realty perseveres in COVID-19 era

Digital Realty’s data centers have been necessary for people working from home. Data centers have become essential services in the wake of shelter-in-place orders. Stein noted that Digital Realty can be a reliable stock for investors.

“Our business is highly resilient, and we remain confident that our global platform will continue to deliver sustainable growth for all stakeholders.”

Digital Realty is a top REIT stock for investors with its recession-proof business.

10. SBA Communications

SBA Communications (NYSE: SBAC) is a REIT stock that’s seen its share price rise 164% over five years. The wireless communications data center REIT has a small dividend of 3% and increased by 53% just over the past year. With the growth of wireless technology over the past years, SBA has become a top REIT stock.

In its last earnings report, Brendan T. Cavanaugh commented on SBA’s Q1 growth.

“SBA had another solid quarter operationally and financially. And given the unprecedented events occurring around the globe, we feel both pleased and fortunate to be able to report our results,” said Cavanaugh.

“Total GAAP(generally accepted accounting principles) site leasing revenues for the first quarter were $492.3 million, and cash site leasing revenues were $490 million,” added Cavanaugh.

Best REIT stocks can pay off with patience

The above list of REIT stocks can be beneficial to investors- but not overnight. REIT’s have many factors that affect their stock prices, so investors must exercise caution and patience. With TradingSim charts to test out trading strategies, investors can find the best REIT stocks for them.

In this volatile bear market, it’s essential for investors to have reliable stocks that pay healthy dividends. Many prominent stocks like Apple (NASDAQ:AAPL) have quarterly dividends, but many lesser-known stocks and ETF’s offer monthly dividends. They can pay investors quickly as part of their investment strategy. Many of the monthly dividend stocks under $10 make them very affordable.

This TradingSim article will explain why investors should add stocks with dividend stocks to their portfolios. In addition to mentioning the companies with monthly dividends, this TradingSim article will point out the top 10 highest monthly dividend stocks to invest in.

Monthly dividend stocks have advantages for long-term investors

Dividend stocks that pay off every month can be beneficial for investors that are in the markets for the long run. In one example, an investor can buy 1,000 shares of a $10 stock. So, the dividend payout would be $1.20 per share with a 12% yield. At the end of the year, the dividend payouts would total about $1,268.

The payout of the monthly dividend stock would be different if the same stock had a quarterly dividend. If the stock had 3% of the original investment, the yield would be greatly reduced at 4%. At the end of the year, an investor would have a dividend payment of around $1, 255.

The two dividend stocks have a slight difference. Monthly dividends offer a small advantage. With the above comparison, traders can look at the highest monthly dividend stocks to invest in. When compared back-to-back, they still have a significant advantage over quarterly dividend stocks.

What could future returns be on monthly dividend stocks?

Companies that pay monthly dividends like Realty Income( NYSE:O) could produce healthy returns for investors. The real estate investment trust has a 5% yield with a current stock price of about $50. If the dividend and stock price stay in the same range, an investor could accumulate impressive income over time. If Realty Income has an annual yield of 60%, after a year, an investor could already have Realty Income stock worth $87.

After five years of investment in Realty Income, an investor could accumulate $500 in dividend income alone. The principal may reach $835 five years after buying Realty Income stock. After 10 years, an investor could have $17,000 in principal and $10,000 in dividend income. An investor could accumulate even more if dividend yields increase for monthly dividend stocks like Realty Income.

Investors should conduct research before choosing stocks

When choosing stocks, traders shouldn’t just invest in companies that pay monthly dividends recklessly. So, with investments, traders shouldn’t just pick companies that pay monthly dividends that pay a quick payout. Similar to stocks, dividends can fluctuate as well. Just as stock prices can plummet, the highest monthly dividend stocks can, too. In the wake of slumping stocks, dividends can change as quickly as stock prices.

Investors can study trends on TradingSim to determine if and when they choose monthly dividend stocks.

Economic crisis can change dividend stocks

The volatile economy has caused some corporations like Capitala Finance(NASDAQ:CPTA) to cut dividend payments. Capitala reduced payouts from monthly to quarterly payouts. Joseph B. Alala III noted that the COVID-19 crisis disrupted the company’s monthly dividend calendar.

“Across our entire firm, we are engaged with the management teams of our existing portfolio companies to determine how this disruption in the economy may impact their need for liquidity and ultimately the impact to our net investment income.

In addition, Alala III also noted that moving to quarterly dividends will help Capitala adjust to change in the markets. “Moving to quarterly distributions gives us additional time to continue with these assessments. He noted that the change was “as circumstances are changing on a daily basis,” added Alala III.

The instability in the markets has greatly impacted companies that pay monthly dividends. Investors should thoroughly research companies’ earnings reports. They should comb through all the information they can find. Information will help investors choose the best monthly dividend stocks for their portfolios. Traders can study TradingSim charts and monthly dividend calendars. With more research, traders can find the best companies that pay monthly dividends.

Realty Income chart before reducing its monthly dividend

Could monthly dividend stocks be in trouble?

While monthly dividend stocks are reliable, the number of dividends may not be as large as expected. The economic downturn may cause companies that pay monthly dividends to reduce their payouts to investors.

Meghan Neenan, managing director and North American head of non-bank financial institutions at Fitch Solutions, noted a slowdown from income generation from business development companies that offer monthly dividends. She asserts that companies may be forced to cut their monthly dividends.

“With non-accruals there is no income being generated by the asset and no revenue flowing to the BDC, which therefore is going to leak in the dividend coverage,” said Neenan.

Robert Dodd, an analyst at Raymond James, believes that the monthly dividend calendar should be cut. He contends that it will help corporations’ bottom line.

“It’s prudent for lots of BDCs to cut dividends this quarter and cut deep enough you don’t have to do it again. But that is asking BDCs to determine what earnings are going to be once this is all over, and that is going to be very hard to estimate,” said Dodd.

Mitchel Penn, an analyst at Janey Capital Markets, notes that even the best monthly dividend stocks may not be immune to cutting dividends.

“There are a lot of good businesses out there that can’t get to their customers, which will likely translate into higher defaults. The higher number of defaults could push many to cut dividends or raise capital,” said Penn.

There is disagreement about whether the best monthly dividend stocks should reduce their yields. The economic downturn may lead to drastic action from the companies and the federal government.

Fed bailout helps REIT’s

Because of the recent economic downturn, real estate investment trusts (REITs) have been hard hit. Many stocks that offer monthly dividends are REITs with holdings in single-tenant real estate. REITs are struggling as millions of tenants can’t pay rent on apartments after suddenly becoming unemployed. The trusts were also in trouble as many of REIT’s held retirement homes. Elderly people living in retirement homes are disproportionately affected by becoming victims of coronavirus.

Ken Leon, director of equity research at CFRA who covers both banking and REITs, noted that REIT’s will have difficulties as a result of the COVID-19 pandemic.

“The second quarter is going to be pretty ugly for commercial real estate,” said Leon.

As a result, the Federal Reserve noted that it will buy $3 billion in commercial mortgage-backed securities. That bailout should help companies with monthly dividends rebound.

However, Leon believes that “even in an optimistic scenario, which would be a V-shaped recovery sometime in the third quarter, the second quarter is probably going to be negatively impacted.”

Kevin Barker, a senior research analyst at Piper Sandler, noted that the current downturn will impact the real estate industry from now on.

“This is a story that causes a major change to how the market treats mortgage REITs going forward and how they view leverage and funding. We might have a much different industry six months from now than we do today,” said Barker.

Best monthly dividend ETF’s rise on hopes of economic recovery

Some ETF’s (exchange traded funds) that offer monthly dividends have seen gains lately. They rose after Wall Street hopes that the economy will recover soon as states slowly re-open.

ETF’s that have monthly dividends include SPDR Dow Jones Industrial Average ETF(NYSEARCA:DIA). The ETF offers a 2.1% yield and saw a slight increase. The SPDR Dow Jones Industrial Average ETF is one of many that could be seen as relatively safe investments once the economy recovers. Brooke May, managing partner at Evans May Wealth, is cautiously optimistic. She believes that stocks and ETF’s will recover as the economy slowly comes back to life.

“The market has already priced in the economic data that we’re seeing currently,” said May.

“As states start to re-open and businesses are able to see revenues again – and measures are taken to contain the virus so we don’t see a resurgence – that will be seen as good news,” added May.

Top 10 Best Monthly Dividend Stocks

Despite the economic volatility, many of the companies that pay monthly dividends are low-risk investments like value stocks. However, the monthly dividend stocks are predominately in industries like real estate. Here are 10 of the corporations that offer the highest monthly dividends.

1. Prospect Capital Corporation

Like many monthly dividend stocks, Prospect Capital (NASDAQ:PSEC) is a low-risk investment. Prospect Capital has a 16.53% yield. That makes it one of the highest monthly dividend stocks. The corporation also has an annual dividend of $0.72. Prospect Capital is a “business development company”. The corporation mostly gives loans to companies in the energy and equity real estate investment trusts.

Some of the corporations that Prospect Capital invests in include Ark-a-Lex Wireline Services, an oil field services company. The company also has holdings in EXC Holdings III, an electronics business.

As a business development company, Prospect Capital must pay out the money it earns through dividends to investors.

The corporation has a low P/E (price-to-earnings) ratio of 11. As a result, Prospect Capital is rated as undervalued by financial analysts. The company’s stock recently soared 10% over the last few weeks.

Prospect Capital profits up despite downturn

The stock rose after investors bought a high volume of shares earlier this month. Prospect Capital Corporation had $0.37 earnings per share over the last year. The company’s chief operating officer, Michael Grier Eliasek, noted Prospect Capital’s success in its last earnings report.

“Our scale business with over $6 billion of assets and undrawn credit continues to deliver solid performance. Our experienced team consists of approximately 100 professionals, which represents one of the largest middle market credit groups in the industry,” said Grier Eliasek.

“With our scale, longevity, experience and deep bench, we continue to focus on a diversified investment strategy”, said Grier Eliasek.

He noted that Prospect Capital “covers third-party private equity sponsor related and direct non-sponsor lending”.

Grier Eliasek also touted its “Prospect-sponsored operating and financial buyouts, structured credit, real estate yield investing and online lending,”.

Monthly dividend stocks like Prospect Capital may reduce its yield because of the COVID-19 crisis. However, Prospect Capital still had an impressive net income of $313 million in 2019. Investors looking for one of the best monthly dividend stocks can choose Prospect Capital.

2. AGNC Investment

AGNC (NYSE:AGNC) is a high-yield monthly dividend stock that offers a still-high 12% yield after cutting its dividend by 25%. The company’s monthly dividend will be reduced to $0.12 per share. AGNC asserted that the reduction will help the company and investors in the long run.

The corporation said that the dividend reduction “provides the company greater flexibility to take advantage of attractive investment opportunities presented by the current environment. “

AGNC said that the dividend cut will be beneficial “to reinvest earnings in excess of our dividend back into our business over time.”

The trust builds revenue through monthly dividends and net asset value creation as well. AGNC is a REIT that uses borrowed funds to buy mortgage-backed securities.

The corporation’s president Gary D. Kain noted the success of the company that pays monthly dividend in its Q4 2019 earnings report.

“Our economic return of 9.6% in the fourth quarter represents AGNC’s best quarter since the second quarter of 2019 and drove a total economic return of 18.7% for the year. Looking ahead, we believe AGNC remains extremely well-positioned to continue to generate attractive risk-adjusted returns as a more benign interest rate environment,” said Kain.

Analysts believe AGNC will weather economic storm

While the company did well at the beginning of the year, March has been a different story. ANGC was greatly affected by the COVID-19 pandemic after-shocks. The corporation’s book value plummeted 23% to $13.60 a share in the last quarter.

Even though REIT’s are tumbling in this volatile stock market, financial analysts say that the stock is still a buy. Bank of America analysts say that the Fed buying troubled mortgage-backed securities like AGNC will help the company recover quickly from the current economic downturn.

“We expect significant agency MBS[mortgage-backed securities] purchases by the Fed to provide both liquidity support,” noted Bank of America analysts.

The analysts also noted that the Federal Reserve help will “provide a reasonable floor for valuations,” wrote the Bank of America analysts.

Even though AGNC has been through a rocky early 2020, investors can still pick the company as one of the best monthly dividend stocks.

Fed helped keep AGNC afloat

During AGNC’s recent Q1 2020 earnings report, the corporation reported that the aforementioned Federal Reserve actions to save mortgage-backed securities(MBS) helped keep the company’s bottom line positive.

“The Federal Reserve took unprecedented actions to support the Agency MBS and U.S. Treasury markets, as well as many other asset classes within the broader fixed income complex”, said AGNC in a statement.

“These Fed initiatives, together with significant actions taken by the Company to manage risk, allowed AGNC to close the quarter with leverage and liquidity at normal operating levels,” said AGNC.

With a strong dividend payout and help from the Fed, AGNC is a solid monthly dividend stock for investors.

3. Cross Timbers Royalty Trust

Cross Timbers Royalty Trust (NYSE:CRT) is a contrast from other companies that have monthly dividends. This corporation has investments in oil and gas properties. The properties are mostly in the oil-rich states of Texas, Oklahoma, and New Mexico. Cross Timbers has oil properties in Mexico as well.

Cross Timbers offers a healthy 20.99% yield. However, that could change with the oil industry in freefall.

The oil industry has suffered from a double whammy of bad news. The Russia-Saudi Arabia battle knocked oil prices down. In addition, with stay-at-home orders, fewer people are driving. That decline is driving down US oil demand.

Bjornar Tonhaugen , head of oil markets at Rystad Energy, noted that “the market knows that the massive oil storage problem remains.

“We are on a calculated path to reach tank tops in weeks,” said Tonhaugen.

“Actions are needed now as the problem stopped being theoretical and far away.

The storage clock is ticking for producers and we are approaching the final countdown if no further action is taken,” added Tonhaugen.

Cross Royal Timber Trust could recover if oil demand rebounds

Michael Hsueh, Citi analyst, noted that companies like Cross Timber could recover if a demand in oil increases later in the year.

“We would need to see a recovery in oil product demand in the end user markets,” said Hsueh in a note to clients.

“For example motorists, airlines and manufacturers as countries cautiously relax epidemic mitigation efforts possibly as soon as May, but more so in June,” added Hsueh.

“We would need to see a normalization of oil inventory from abnormally high levels,” said Hsueh.

Hsueh also believes that oil refiners have to reduce inventory to increase demand.

“Oil refiners will choose to drawdown inventory in the first instance, before resuming a normal pace of buying,” he added.

Cross Timber Royalty Trust is a small-cap company with a $69 million capitalization. The corporation also had $5 million in earnings in 2019. Even though the oil industry is reeling from volatility, Cross Timber is an overall healthy monthly dividend stock for investors.

4. Horizon Technology Finance

Horizon Technology Finance( NASDAQ:HRZN) is another company that pays a monthly dividend. Its dividend is 10% This corporation is business development company that invests in tech, life science, and healthcare information businesses.

Horizon Technology Finance had mixed results despite the recent economic downturn. Because the corporation supports in-demand fields like tech, Horizon’s net investment income in Q1 2020 increased to $4.3 million. That’s a slight jump from $3.2 million from the same period in 2019.

While Horizon had revenue of $10.1 million in Q1 2020, there was disappointing news as well from the corporation. The COVID-19 -caused downturn led to a Losses from Q1 totaled $708,000.

Robert D. Pomeroy, Jr., chairman and chief executive officer of Horizon, noted that Horizon will commit to its tech and healthcare holdings.

“In this challenging economic environment, we are focused on continuing to manage our existing portfolio of investments, maintain a strong balance sheet and prudently originate new investments,” said Pomeroy, Jr.

Pomeroy also pledged to support the corporations in its portfolios during the coronavirus pandemic.

“We are working closely with the management teams and investors of our portfolio companies to help them through this period of great uncertainty, especially those companies that have been most impacted by COVID-19. We believe our current liquidity position and strong balance sheet provide us with the capacity to manage through this unprecedented environment,” said Pomeroy, Jr.

Horizon commits to monthly dividend despite economic volatility

Horizon is one of the highest monthly dividend stocks and intends to stay that way. Pomeroy vowed that Horizon would continue to distribute its monthly dividend.

“While our outlook is cautious, we are maintaining our current monthly distribution level of $0.10 per share based upon our outlook and our spillover income. Looking ahead, we will continue to closely monitor the environment, our portfolio companies and our credit quality, while we selectively invest in opportunities that meet our underwriting criteria, in order to continue to deliver value to our shareholders,” said Pomeroy.

5. Main Street Capital

Main Street Capital is another business development company with an impressive 8% yield. The corporation loans money to small corporations with sales under $150 million. In its Q4 2019 earnings report, chief executive officer Dwayne L. Hyzak, noted that the net investment income exceeded its monthly dividends.

“We are pleased that for the fourth quarter and full year, we again generated distributable net investment income or DNII per share in excess of our regular monthly dividends, exceeding the monthly dividends paid in the fourth quarter by approximately 7% and for the full year by approximately 10%”, said Hyzak.

Financial analysts says Main Street Capital is a buy

Despite the volatility of the stock market, financial experts are still bullish on Main Street Capital stock. Financial expert Mark Skousen believes that Main Street is one of the best monthly dividend stocks.

“MAIN issued an important announcement, stating that the company insiders are buying stock, and believe their diversified portfolio and the company’s limited use of debt will serve them well to survive this crisis,” said Skousen.

Skousen also noted that he recently spoke to Main Street Capital founder Vince Foster and had a reason for optimism. He said that Foster was adamant that Main Street Capital would maintain its monthly dividend.

Main Street Capital is sure to be a top monthly investment stock with its strong dividend yield.

6. Shaw Communications

Shaw Communications (NYSE: SJR) is a Canadian telecommunications company that has a nice dividend for investors. It’s the only telecom monthly dividend stock with a 4% yield.

Shaw lays off workers during economic slump

During the economic downturn, Shaw president Paul McAleese announced that there will be temporary layoffs of workers.

“We value the hard work and expertise of all our employees in helping deliver connectivity to our customers across the country. Unfortunately, these changes are necessary until our business activities resume to more normal levels,” said McAleese in a statement.

“With our gratitude, we will be providing financial support to affected employees beyond applicable government programs, and we look forward to welcoming them back when business conditions improve,” added McAleese.

Shaw has strong Q2 earnings report

Despite the layoffs, Shaw still had a positive Q2 2020 earnings report.

Consolidated earnings increased by 3.7% to C$1.36 billion. CEO Brad Shaw touted the results.

“Our second- quarter performance reflects our continued focus on execution, delivering stable Wireline results and sustained Wireless growth, supported by underlying networks that continue to prove their worth,” said Shaw.

Despite the ups and downs of the economy, Shaw is one of the best monthly dividend stocks.

Financial experts see Shaw as a strong buy

RBC Capital analyst Drew McReynolds believes that Shaw is a solid buy.

In the current environment, we believe Shaw is well-positioned to be a “safe haven” for investors”.

He added that Shaw has an “attractive dividend yield, reasonable exposure to strong demand for Internet services, multi-year growth runway for wireless given under-indexed market share and a market position within the more price-sensitive, lower end of the telecom market that could benefit during a recession.”

7. Gladstone Commercial Corporation

Gladstone Commercial Corporation (NASDAQ:GOOD) has an impressive yield of 11%. The real estate interest trust invests in single- and multi-tenant housing.

There is uncertainty about real estate with many tenants currently unable to pay rent. Despite that, Gladstone Commercial had a positive Q1 2020 earnings report. The corporation reported $33.6 million in operating revenue, an increase from the last quarter. This surpasses the $28.14 million revenue from the same time a year ago.

Mike Sodo, chief financial officer of Gladstone Commercial, noted that the monthly dividend stock will continue its payout.

“Regarding the common stock dividend, we did increase it in the first quarter, and while the increase was small, we have also announced that we are leaving the dividend as is in the second quarter. We have not cut or suspended the dividend since our IPO in 2003. Our stock closed yesterday at $16.05. The distribution yield on the stock is currently 9.4%. Many REITs are trading at much lower dividend yields,” said Sodo.

With a healthy payout and strong earnings report, Gladstone Commercial is a solid company that pays monthly dividends.

8. Solar Senior Capital

Solar Senior Capital (NASDAQ:SUNS) is a business development company with an 8% yield. The corporation invests in companies with revenue of at least $50 million. During its last earnings report, Solar Senior had a positive outcome because of its diversification.

“SUNS carry a dividend yield of 7.8% which represents a significantly higher rate of return than the 5.6% implied yield of the S&P/LSTA Leveraged Loan 100 Index. Given the overall credit quality of SUNS diversified portfolio, our differentiated origination engines, and our disciplined investment philosophy we believe SUNS continues to represent an attractive investment on both a relative and absolute value basis,” noted Solar Senior Capital.

Economic Stimulus helps Solar Senior

In addition to the positive earnings report, Solar Senior has been helped by the recent economic stimulus money that has been sent to businesses. In a letter to investors, Solar Senior noted that money will help the corporation remain a company that pays a monthly dividend.

“The $2 trillion economic stimulus package recently passed by Congress and signed into law by the President is designed to provide financial assistance to small businesses. We expect this assistance to reach many of the businesses to which we provide financing,” said Solar Senior.

“Solar Senior entered this downturn with what we believe to be a defensively positioned, high-quality portfolio constructed in anticipation of a market disruption,” added the company.

A diversified portfolio and government help make Solar Senior one of the best monthly dividend stocks.

9. Whitestone REIT

Whitestone REIT (NYSE:WSR) is a real estate investment trust that acquires “e-commerce resistant” neighborhood and lifestyle properties. The company is one of the highest monthly dividend stocks with an 8% yield. In its last earnings report, the company that pays a monthly dividend showed it was making progress. Jim Mastandrea, chairman and CEO of Whitestone, commented on the growth.

“We continued to show strong underlying fundamentals in 2019 as we grew same- store NOI( net operating income) by 4.7% in the fourth quarter and 2.4% for the full year,” said Mastandrea.

“We also made significant progress increasing rental rates, realizing significant income from equity investment as a result of gains on Pillarstone OP asset dispositions, scaling our G&A [general and administrative expenses] and making progress on our capital structure, ” said Mastandrea.

“We are pleased with our acquisition of Las Colinas Village in Irving, Texas in the fourth quarter, and look forward to growing the portfolio and cash flow in the years ahead. Our high-quality properties in high growth markets coupled with our ‘e-commerce resistant’, service-based business model, will continue to result in long-term value creation for all our stakeholders,” commented Mastandrea.

“This is evidenced in our long term, industry-leading Total Shareholder Returns, which rank us number one of the U.S. public shopping center REITs over a three-year timeframe, and number two over a five-year timeframe,” concluded Mastandrea.

Whitestone monthly dividend reduced, but still strong

In the wake of the economic downturn, Whitestone has reduced its monthly dividend. It’s been cut from $0.095 to $0.035, a 64% drop. Despite the reduction, Whitestone is still a reliable monthly dividend stock.

10. STAG Industrial

In contrast to the e-commerce resistance of Whitestone REIT, STAG Industrial is having success because of e-commerce. It’s yet another REIT monthly dividend stock that investors can choose. STAG has a 6% monthly yield.

STAG purchases single-tenant properties. The corporation isn’t acquiring any new properties because of the coronavirus virus. However, the corporation has done well with its purchases of warehouses. Many warehouses are being used for e-commerce, especially in this time of quarantine. Some of the company’s clients include Amazon (NASDAQ:AMZN) and FedEx (NYSE: FDX).

STAG touted its success in its last Q4 2019 earnings report.

“Same-store cash NOI ( net operating income) grew 2.4% during 2019 exceeding the high end of our revised guidance. Same-store cash NOI growth was driven by our retention rate of 76.7% and cash releasing spreads of 10%,” said STAG in a statement.

With diversification and growth in e-commerce, STAG Industrials is one of the best monthly dividend stocks.

Monthly dividend stocks important for investors wanting steady, passive income

The highest monthly dividend stocks offer many options for investors. If investors want to choose stocks that have some stability in this volatile economic time. If traders want to invest in stocks or ETF’s with a slow, but steady source of income, monthly dividend stocks are a good choice. Investors that want to passively invest in their spare time, monthly dividend stocks can be a good option.

When investors want to follow a monthly dividend calendar, they can follow the calendar to reinvest dividends into buying more shares of a company.

Investors must conduct research and analysis to pick the highest monthly dividend stocks. With TradingSim’s charts, investors can test their trading strategies to find the best monthly dividend stocks for their portfolios.

Top 10 REIT Stocks for Investors

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