Want to Earn Passive Income From Real Estate but Don't Have $50,000? Check Out These High-Yielding Dividend Stocks. | The Motley Fool (2024)

Investing in REITs is a low-cost way to start generating passive income from real estate.

Rental properties can provide their owners with a nice supplemental income source. However, as the old saying goes, it takes money to make money. That's certainly true of rental properties. The initial investment can be over $50,000 when factoring in the down payment, closing costs, and any renovations or repairs needed to make the property ready to rent. That's not the kind of cash most beginning investors have lying around.

However, those starting on their investing journey do have alternative options. Investing in real estate investment trusts (REITs) can be a great way to collectpassive income from real estate. Two excellent options for beginners to consider areRealty Income(O -0.17%) andStag Industrial (STAG -0.17%).

The name says it all

Realty Income is a great REIT to own for dividend income. It invests in properties that produce durable rental income, enabling the REIT to pay a dependablemonthly dividend. That's exactly what it has delivered over the years. The REIT has paid 637 consecutive monthly dividends over its 54-year history. That monthly payout is ideal for passive income seekers.

Budding real estate investors don't need much money to buy shares of Realty Income. They can buy as little as one share (currently costing less than $60). That investment will start producing income right away. The REIT's monthlydividend yields5.2% (which is several times higher than theS&P 500's 1.5% dividend yield). To put that into perspective, every $1,000 invested into buying Realty Income's stock would produce about $52 of annual passive income. That compares to only about $15 for a $1,000 investment in an S&P 500 index fund.

Realty Income supports its attractive dividend with a high-quality real estate portfolio. It currently owns a diversified portfolio of over 13,000 properties (primarily retail, industrial, experiential, and agricultural) across North America and Europe, leased to over 1,300 tenants under long-term net lease (NNN) agreements. Those leases make the tenants responsible for covering maintenance, building insurance, and real estate taxes, enabling Realty Income to produce very stable rental income.

The REIT pays out a relatively conservative percentage of its steady rental income in dividends (76.5% of its adjustedfunds from operationsin the second quarter). That gives it a nice cushion while allowing it to retain some cash to fund new income-producing real estate investments. The company's growing portfolio increases its rental income, allowing the REIT to steadily raise its dividend.

Realty Income has increased its dividend 121 times since its public market listing in 1994. That upward trend seems likely to continue, making the REIT a great option for those seeking a steadily rising passive income stream.

Focused on in-demand real estate

Stag Industrial is a low-priced REIT (shares are currently around $35 apiece). It also pays a monthly dividend that currently yields 4.1%.

Theindustrial REITowns over 550 warehouses and light manufacturing facilities leased to credit-worthy tenants under long-term agreements.Demand for industrial real estate is strong these days, driven by steadily increasing e-commerce adoption and changing supply chain management practices. That's driving up market rents. Stag is steadily capturing higher market rents as legacy leases expire and it signs new leases. The REIT has already addressed 94.2% of its expected 2023 lease expirations. It has captured a more than 30% increase in rents compared to the prior rates on the same space.

Stag Industrial's other growth driver is acquisitions. The REIT has historically acquired an average of $750 million of properties annually. While it expects lower acquisition volume in 2023 (between $300 million and $700 million) because of the current market environment, it has over $3.1 billion of acquisition opportunities in its pipeline. As market conditions normalize, acquisition volume should increase.

The company's dual growth drivers should increase its rental income, enabling Stag Industrial to continue growing its dividend. It has steadily raised its payout since its public market listing in 2011.

You don't need a lot of money to start earning passive income from real estate

Not everyone can afford the high initial investment needed to buy an income-producing rental property. The good news is that you don't need a lot of money to invest in real estate because REITs make it accessible for almost everyone. Realty Income and Stag Industrial are great options for beginners because they offer high-yielding dividends that should continue rising steadily.

Matthew DiLallo has positions in Realty Income and Stag Industrial. The Motley Fool has positions in and recommends Stag Industrial. The Motley Fool recommends Realty Income. The Motley Fool has a disclosure policy.

Want to Earn Passive Income From Real Estate but Don't Have $50,000? Check Out These High-Yielding Dividend Stocks. | The Motley Fool (2024)

FAQs

What are the highest paying monthly dividend stocks? ›

Top 9 monthly dividend stocks by yield
SymbolCompany nameForward dividend yield (annual)
EFCEllington Financial12.89%
EPREPR Properties8.43%
APLEApple Hospitality REIT6.71%
ORealty Income Corp.6.00%
5 more rows
May 31, 2024

What are the three dividend stocks to buy and hold forever? ›

Here are three magnificent dividend stocks to buy and hold forever.
  • Johnson & Johnson. Johnson & Johnson (NYSE: JNJ) has been a favorite for income investors for decades. ...
  • Target. Target (NYSE: TGT) has been in business since 1902. ...
  • Verizon Communications. Verizon Communications (NYSE: VZ) is the newbie on the list.
Jun 1, 2024

How to make $2,000 a month passive income? ›

Wrapping up ways to make $2,000/month in passive income
  1. Try out affiliate marketing.
  2. Sell an online course.
  3. Monetize a blog with Google Adsense.
  4. Become an influencer.
  5. Write and sell e-books.
  6. Freelance on websites like Upwork.
  7. Start an e-commerce store.
  8. Get paid to complete surveys.

What are the highest paying dividend stocks? ›

Top 25 High Dividend Stocks
TickerNameDividend Yield
ARCCAres Capital8.90%
HIWHighwoods Properties7.77%
WHRWhirlpool7.59%
ENBEnbridge7.35%
6 more rows
5 days ago

What REIT pays the highest dividend? ›

Redwood Trust (RWT)

Redwood is the highest-yielding REIT on this list, boasting an 11.24% forward yield based on a quarterly dividend payout of 16 cents per share. It also has a moderate buy rating based on a 4.30 average from 10 analysts.

What is the highest paying dividend fund? ›

Top 100 Highest Dividend Yield ETFs
SymbolNameDividend Yield
IWMYDefiance R2000 Enhanced Options Income ETF55.81%
QQQYDefiance Nasdaq 100 Enhanced Options Income ETF53.16%
TILLTeucrium Agricultural Strategy No K-1 ETF53.11%
KMETKraneShares Electrification Metals Strategy ETF52.43%
93 more rows

How to make $5,000 a month passively? ›

If you like the idea of earning passive income, one idea to make $5,000 per month is to rent out things for money. This is probably the best option if you're very busy with your job and don't have time to start a new side hustle. You can essentially let your assets make money for you so you're earning on autopilot.

How to make 10k a month passive income? ›

If you want to make $10k a month passively, some of the most realistic options include investing in real estate or renting out your own home or multiple properties to tenants. Dividend income investing can also work, but you need a lot of capital to reach $10,000 a month in passive income.

How to make $2500 a month in passive income? ›

Invest in Dividend Stocks

One of the easiest passive income strategies is dividend investing. By purchasing stocks that pay regular dividends, you can earn $2,500 per month in dividend income. Here's a realistic example: Invest $300,000 into a diversified portfolio of dividend stocks.

Who currently pays the highest dividends? ›

20 high-dividend stocks
CompanyDividend Yield
Eagle Bancorp Inc (MD) (EGBN)8.60%
Washington Trust Bancorp, Inc. (WASH)8.57%
Peoples Financial Services Corp (PFIS)8.51%
First Of Long Island Corp. (FLIC)8.43%
17 more rows
6 days ago

What are the cheapest stocks that pay the highest dividends? ›

3 Cheap Dividend Stocks to Buy Yielding 4% or More
  • Verizon Communications Inc. (VZ)
  • WEC Energy Group Inc. (WEC)
  • Kinder Morgan Inc Class P. (KMI)
5 days ago

Which dividend king has the highest yield? ›

3 Highest Yielding Dividend Kings To Buy and Hold Forever
  • 3M Company (MMM) Since 2022, 3M tends to float to the top when I check the highest-yielding dividend stocks. ...
  • Universal Corporation (UVV) ...
  • Altria Group (MO) ...
  • Bonus: Leggett & Platt (LEG)
Mar 27, 2024

Which stock pays dividend monthly? ›

Best Monthly Dividend Paying Stocks in India
NameClose PriceDividend Yield %
Punjab National Bank126.451.19
Union Bank of India Ltd156.5
Polycab India Ltd6684.150.45
Supreme Industries Ltd5,472.65
6 more rows

Are monthly dividend stocks worth it? ›

Monthly dividend stocks can provide predictable income and make budgeting easy since they pay dividends every month of the year. While most companies pay dividends quarterly, there are 80 stocks that pay dividends monthly. And many of them have high dividend yields above 7%.

Does Coca-Cola pay monthly dividends? ›

The Company normally pays dividends four times a year, usually April 1, July 1, October 1 and December 15. Shareowners of record can elect to receive their dividend payments electronically or by check in the currency of their choice.

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