Singapore-based investors who love dividends always find themselves buying into shares of real estate investment trusts (REITs). That’s understandable given the many benefits of REITs.
But they tend to buy REITs that are listed in Singapore, limiting the wide variety of choice that’s on offer to global investors.
The world’s biggest REIT market – by far – is in the US, where the market has a much longer history.
It dates back to the days of when these REIT structures were first listed on US stock markets in the early 1960s.
While there is the dreaded “30% dividend withholding tax” that come with US stocks, I would argue that the length of dividend payments is more relevant to total returns over the longer term.
Importantly, enabling your dividends from REITs to compound is crucial. The more frequent the dividend payments, the better. Rather than quarterly and semi-annual payments, monthly dividends are better.
Thankfully, there are REITs listed in the US that pay monthly dividends. For those of us who love frequent dividends (who doesn’t?), here are two REITs that Singapore investors can consider buying.
1. STAG Industrial
Industrial property owner STAG Industrial Inc (NYSE: STAG) is a US-focused logistics REIT that is present in over 44 US states and owns 544 properties.
As of 31 December 2021, the REIT has leased out a total of 108.6 million square feet with a robust portfolio occupancy rate of 96.9% and a relatively long weighted average lease expiry (WALE) of 5.1 years.
With the acceleration of “re-shoring” manufacturing back to the US and “just-in-case” inventory being available on the back of supply chain constraints, STAG’s portfolio is ideally positioned to take advantage of this.
There’s also the added advantage that around 40% of the REIT’s portfolio handles e-commerce activity, which (even after the Covid-19 pandemic spike) is still in the early stages of growth in the US (see below).
Source: STAG Industrial investor relations presentation, March 2022
Of course, that monthly dividend is important. In STAG’s case, the REIT started paying out a monthly dividend in the fourth quarter of 2013.
Over the past nine years, STAG Industrial has grown its dividend per share (DPS) at a compound annual growth rate (CAGR) of 3.4%, from US$1.07 in the whole of 2012 to US$1.45 for the full year 2021.
Based on its current monthly distribution payout of US$0.1217, STAG Industrial is yielding 3.7%.
2. EPR Properties
One more US REIT that pays out a monthly dividend is EPR Properties (NYSE: EPR).
Describing itself as a “diversified experiential REIT”, it owns properties that are more tied to experiences, such as cinemas (which are now being reopened en masse), fitness centres, waterparks, bowling alleys, and aquariums – to name just a few.
The company believes it’s serving experiential real estate demand that has a total addressable market of over US$100 billion.
EPR owns 353 properties, with 175 of those being theatre complexes. In that sense, it should be an early winner of the reopening of cinemas.
While it did get hit hard early on in Covid-19 – given the REIT’s properties rely on in-person interactions it also had to suspend its dividend – it has recovered.
What’s more, the REIT has no debt maturities until 2024. That helps shelter the REIT from any re-pricing of debt amid rising interest rates.
On a forward 12-month basis, going off its current monthly dividend of US$0.275, EPR shares are yielding a juicy 6.4%.
Monthly dividends and compounding
One of the reasons I like dividend stocks in Singapore that pay out quarterly is that you can then compound those gains by reinvesting those dividends continuously.
With STAG Industrial and EPR Properties, that cycle of reinvesting dividends and compounding can be supercharged given they both pay out 12 times a year.
Meanwhile, if you’re retired and rely on passive income, the monthly dividend gives you more frequent cash flow. That’s something any investor can applaud.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.
In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.