If You Like Realty Income's 5.6%-Yielding Monthly Dividend, You Should Check Out This 6.2%-Yielding Dividend Stock

Realty Income (NYSE: O) is known as The Monthly Dividend Stock. The real estate investment trust's (REIT) stated mission is "to invest in people and places to deliver dependable monthly dividends that increase over time." It has certainly done that throughout its history. It has declared 660 consecutive monthly dividends since its formation and raised its payment 131 times since its public market listing in 1994.

The REIT currently offers a 5.6%-yielding dividend, which is very attractive considering that the S&P 500's dividend yield is below 1.5%. However, it's not the only REIT paying an attractive monthly dividend. EPR Properties (NYSE: EPR) currently pays a monthly dividend yielding 6.2%. Here's why those who like Realty Income should check out this even higher-yielding monthly dividend stock.

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An entertaining portfolio

EPR Properties is a REIT focused on experiential real estate. It owns movie theaters, accounting for 38% of its annual earnings; eat-and-play properties, 24%; attractions and cultural properties, 13%; fitness and wellness locations, 8%; ski resorts, 7%; experiential lodging, 2%; and gaming properties, 2%. The REIT also owns a small educational property portfolio, consisting of early childhood education (4%) and private schools (2%), that it's steadily selling off to recycle capital into experimental properties.

Realty Income also invests in experiential real estate as part of its diversified portfolio. The REIT's portfolio currently has properties in gaming, making up 3.2% of its annual rent; health and fitness, 4.3%; theaters, 2.1%; and entertainment 1.8%.

EPR Properties leases these properties back to companies that operate the experiences under long-term, primarily triple net leases (NNN). That's the same lease structure utilized by Realty Income. These leases provide the REITs with relatively stable and steadily rising rental income.

A strong financial profile

EPR Properties expects its portfolio to produce between $5.00 and $5.16 per share of funds from operations (FFO) as adjusted this year. With its current dividend rate at $0.295 per share each quarter, or $3.54 annually, the REIT has a conservative dividend payout ratio of around 70%. That enables it to retain cash to fund new investments. EPR has a lower dividend payout ratio than Realty Income, which was around 75% of its adjusted FFO in the first quarter.

EPR Properties also has an investment grade-rated balance sheet with lots of liquidity. While the company has a good balance sheet, it's not as strong as Realty Income's, which rates as one of the 10 best in the REIT sector. Higher interest rates in recent years have therefore made it more challenging for EPR to obtain outside capital to fund new investments. That has led it to sell off educational and theater properties to recycle that capital into new experiential property investments.

Solid growth prospects

EPR Properties estimates that the total addressable market opportunity for experiential real estate is well over $100 billion. Given the current size of its portfolio, with $6.4 billion of experiential properties, it has a massive growth runway.

The REIT is investing conservatively these days due to higher interest rates by funding new investments internally via post-dividend free cash flow, the proceeds from capital recycling, and new debt within its current leverage level. That works out to $200 million to $300 million of new investments per year. At that rate, the REIT can grow its adjusted FFO per share by around 3% to 4% annually. That should support a similar dividend growth rate; it raised its payout by 3.5% earlier this year. The company invested a total of $33.7 million in the first quarter, including $14.3 million to acquire an attraction property. Meanwhile, it has lined up $148 million of spending on experiential development and redevelopment projects it expects to fund over the next two years.

Realty Income also expects to grow its adjusted FFO per share at a low-to-mid single-digit rate. That should support continued growth in its dividend. However, given its greater diversification, it has a much bigger opportunity set, at $14 trillion.

A great monthly dividend stock

Realty Income is one of the best monthly dividend stocks to buy for passive income. However, it's not the only option out there. EPR Properties currently offers a higher-yielding payout backed by a solid financial profile. It's a good option for those seeking more passive dividend income each month than Realty Income currently provides.

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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 has a disclosure policy.