Should You Forget Realty Income and Buy Healthpeak Properties Instead?

Realty Income (NYSE: O) is one of the world's largest real estate investment trusts (REITs). It's also one of the most popular companies in the sector, thanks in part to its high-yielding, steadily rising monthly dividend.

However, it's not the only REIT with a compelling monthly income stream. Here's a look at whether Healthpeak Properties (NYSE: DOC) is the better REIT to buy for monthly dividends.

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The consistent monthly dividend REIT

Realty Income recently declared its 667th consecutive monthly dividend payment. The REIT has increased its payment 133 times since its public market listing in 1994, including for the past 113 quarters in a row. It has grown its dividend at a 4.2% compound annual rate during that period. That's an impressive record of consistent dividend growth.

The REIT's monthly dividend currently yields over 5%, which is above the sector's average (closer to 4%). Realty Income backs its high-yielding dividend with very stable cash flow. It has a well-diversified portfolio consisting of 15,400 retail, industrial, gaming, and other properties across North America and Europe secured by long-term net leases. Meanwhile, the company pays out less than 75% of its stable income in dividends, retaining the rest to fund new income-generating investments. The company also has one of the 10 best balance sheets in the REIT industry.

Realty Income's robust financial flexibility enables it to invest in growing its portfolio to support continued dividend increases. It was on track to invest over $6 billion last year. It has a long growth runway ahead, given that there is over $14 trillion of real estate suitable for net leases across the U.S. and Europe.

The upstart monthly dividend stock

Healthpeak Properties transitioned from quarterly to monthly dividends last April. It also increased its payment by 1.7%, its first raise since reducing its dividend rate by 19% in 2020. The healthcare REIT currently has a 6.8% dividend yield.

The REIT has a diversified portfolio of healthcare properties. It owns over 700 properties, including outpatient medical, labs, and senior housing. It leases these properties to high-quality healthcare operators. Those leases provide Healthpeak with stable and steadily rising rental income to support its dividend. It currently has a 71% dividend payout ratio and a healthy investment-grade balance sheet, giving it the financial flexibility to grow its portfolio.

Healthpeak is currently working to unlock the value of its portfolio. It recently announced the formation of Janus Living, a REIT focused on senior housing. Healthpeak plans to complete an IPO of Janus in the first half of this year to unlock the value of its senior housing portfolio and more effectively pursue new investments. It currently has $675 million of new senior housing investments lined up. Additionally, the company is selling some of its outpatient medical properties to recycle capital into new lab investments. It's capitalizing on strong private-market demand for stable outpatient medical properties to opportunistically acquire lab properties amid the current sector downturn. It recently announced $925 million in transactions, including the purchase of a lab campus in San Francisco and the sale of several outpatient medical properties.

The healthcare REIT expects to maintain its current dividend rate after completing the IPO of Janus, as dividends from that entity will help support its payout. Meanwhile, new lab investments could eventually enable Healthpeak to increase its dividend as tenant demand improves.

It all comes down to your risk tolerance

Healthpeak Properties is a compelling monthly dividend stock. It currently has a higher dividend yield than Realty Income. Additionally, it has more near-term upside potential as it works to unlock the value of its portfolio. So, if you want more income now and are willing to take on more risk for more total return potential, Healthpeak Properties is an intriguing option. However, if you're seeking a bankable income stream that should rise steadily in the future, Realty Income is the safer bet.

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