The Smartest Real Estate Dividend Stocks to Buy With $2,000 Right Now

Key Points

• EPR Properties has a 6% dividend yield.

• Realty Income has increased its monthly dividend 131 times since coming public in 1994.

• Healthpeak Properties pays a very healthy monthly dividend.

• 10 stocks we like better than EPR Properties ›

Investing in real estate investment trusts (REITs) can be a very effective way to generate consistent dividend income. These companies typically produce dependable rental income that supports attractive dividend payments. Most REITs also reinvest capital to expand their portfolios, supporting rental income and dividend growth.

EPR Properties (NYSE: EPR), Realty Income (NYSE: O), and Healthpeak Properties (NYSE: DOC) currently rank among the most compelling REITs to buy for dividend income right now. They offer high-yielding monthly dividends, making them ideal choices for investors seeking reliable passive income.

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An attractive income stream

EPR Properties focuses on experiential real estate such as movie theaters, eat-and-play venues, and attractions. It leases these properties to operators under long-term, net leases that require tenants to cover all operating costs, including routine maintenance, real estate taxes, and building insurance. This structure provides EPR with stable rental income.

The REIT expects to generate between $5.00 and $5.16 per share of funds from operations (FFO) as adjusted this year. That's plenty of cash flow to cover its monthly dividend payments ($0.295 per share each month and $3.54 annually). At that payment rate, the landlord has a dividend yield of more than 6%, turning a $2,000 investment into $120 of annual dividend income (or $10 per month).

EPR Properties reinvests its excess cash after paying dividends into additional experiential properties. The REIT spent $37.7 million in the first quarter, including buying an attraction property for $14.3 million. It has lined up another $148 million of experiential development and redevelopment projects it expects to fund over the next two years. These investments should grow the REIT's FFO per share by 3%-4% annually, supporting dividend growth within that range.

An extremely durable dividend stock

Realty Income owns a diversified portfolio (retail, industrial, gaming, and other properties), net leased to many of the world's leading companies. Its high-quality portfolio generates durable rental income to support its monthly dividend. Its portfolio has been so resilient that the REIT has only had one year when it didn't grow its adjusted FFO per share (2009).

The REIT's durable rental income has provided it with a rock-solid foundation to pay dividends. Realty Income has declared 661 consecutive monthly dividends throughout its history. Better yet, it has raised its payment 131 times since its public market listing in 1994, including 111 straight quarters. That payout currently yields more than 5.5%.

Realty Income is in an excellent position to continue increasing its dividend. It generates substantial free cash flow after paying dividends and maintains one of the industry's strongest balance sheets. Meanwhile, it has a massive market opportunity, with over $14 trillion of real estate in its core markets suitable for net leases.

A very healthy income stock

Healthpeak Properties holds a diversified portfolio of healthcare real estate. Its outpatient medical, lab, and senior housing assets benefit from steady and rising demand, producing consistent and growing rental income. This stable income supports the landlord's monthly dividend, which yields nearly 6.5%.

Healthpeak's existing portfolio should grow its rental income by around 3% per year due to contractual rental escalation clauses. Additionally, the company expects to capture bigger rent bumps as existing long-term leases expire and it signs new leases at higher market rents.

Meanwhile, Healthpeak's strong balance sheet and substantial excess cash flow after paying dividends provide ample flexibility to pursue new investments, including acquisitions, development projects, and mortgage loans secured by healthcare real estate. The REIT's growth drivers should increase its income, supporting further dividend growth.

Smart REITs to buy for passive dividend income

EPR Properties, Realty Income, and Healthpeak Properties generate reliable rental income to support their high-yielding monthly dividends. They also have strong financial positions that enable continued investments in new income-generating properties, fueling further income and dividend growth. These qualities make them top REITs to buy for investors seeking to turn $2,000 into dependable passive income.

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Matt DiLallo has positions in EPR Properties and Realty Income. The Motley Fool has positions in and recommends EPR Properties and Realty Income. The Motley Fool recommends Healthpeak Properties. The Motley Fool has a disclosure policy.