3 High-Yield Dividend Stocks to Buy in May to Collect Passive Income Every Month

Most dividend stocks make quarterly payments. That can make it a bit challenging for those seeking regular passive income to help cover their monthly expenses. You'd need to buy dividend stocks with staggered payment schedules to help align your income with your monthly bills.

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A much easier option is to invest in monthly dividend stocks. Several companies, most notably real estate investment trusts (REITs), pay their dividends each month, including Agree Realty (NYSE: ADC), EPR Properties (NYSE: EPR), and Stag Industrial (NYSE: STAG). That trio currently has higher-yielding dividends, making them ideal stocks to buy this May to start collecting passive income each month.

Investing in low-risk retail properties

Agree Realty's dividend yield is right around 4%. That's more than double the dividend yield of the S&P 500, which stands at less than 1.5%. At that rate, every $1,000 invested in the REIT would yield approximately $3.33 in dividend income each month, or roughly $40 per year.

The REIT owns a portfolio of retail properties that produces very stable income. It invests in single-tenant properties secured by net leases or ground leases, accounting, respectively, for 89.4% and 10.6% of its annual base rent. Agree Realty partners with financially strong retailers in resilient sectors -- think grocery stores, home improvement centers, and tire and auto service locations -- with 68.3% having investment-grade credit ratings.

Agree Realty has a low dividend payout ratio for a REIT, at 72% of its adjusted funds from operations (FFO) last quarter. That enables it to retain lots of cash to invest in additional income-generating retail properties. The REIT also has a conservative balance sheet, enhancing its ability to continue expanding its portfolio. The company's growing portfolio supports a steadily rising dividend, with a 5.5% compound annual dividend growth over the past decade.

An exciting income stream

EPR Properties has a higher dividend yield at more than 7%. The REIT focuses on owning experiential properties, such as movie theaters, eat-and-play venues, and attractions. It leases these properties back to operating companies, typically under long-term net leases.

The company generates plenty of cash to cover that high-yielding payout. It expects its payout ratio to be between 69% and 72% of its FFO as adjusted this year. That gives it a decent cushion while enabling it to retain cash to fund new experiential real estate investments.

EPR Properties currently has enough internal funding capacity to invest $200 million to $300 million each year. That investment level will support about 3% to 4% annual FFO per share growth and a similar yearly rise in its dividend.

A steady grower

Stag Industrial's monthly dividend yields 4.5%. The company backs that payout with a diversified industrial real estate portfolio. It signs long-term leases that escalate rents at a low single-digit rate, enabling the REIT to collect a steadily rising income stream.

The industrial REIT has a 74% dividend payout ratio. That enables it to generate about $95 million in annual free cash flow after paying dividends, which it uses to help fund new investments. The REIT also has a solid balance sheet, giving it additional financial flexibility.

Stag Industrial typically invests a few hundred million dollars in expanding its portfolio each year, with $350 million to $550 million planned for this year. It tends to target properties with value-add upside potential from releasing at a higher rate as legacy contracts expire or completing expansion projects at the site. These investments yield higher returns, contributing to the REIT's growth. The combination of rental increases and value-enhancing acquisitions has enabled Stag Industrial to increase its dividend every year since it went public in 2011.

Ideal passive income investments

Agree Realty, EPR Properties, and Stag Industrial all pay higher-yielding monthly dividends backed by income-generating real estate portfolios. The REITs produce more than enough cash flow to cover their payouts, enabling them to invest the excess in expanding their portfolios. That helps grow their rental income, which allows them to increase their monthly dividends. Their combination of yield, growth, and monthly payment schedule makes them ideal dividend stocks to buy for passive income this month.

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Matt DiLallo has positions in EPR Properties and Stag Industrial. The Motley Fool recommends EPR Properties and Stag Industrial. The Motley Fool has a disclosure policy.