As rates come down, monthly dividend stocks with high yields are coming under the spotlight. The FOMC meeting has started today and could lead to the announcement that interest rates will get lower, especially due to inflation coming in cooler earlier this month. Most macroeconomic indicators have also come in below expectations. This will likely drive down treasury yields even more.

Thus, locking in some monthly dividends is a good idea before the rest of the market does. If you want a meaningful amount in passive income, say $500, that unfortunately won’t come in cheap. It’ll usually take over $100,000, and up to $250,000, depending on what kind of safety you want. If you have a smaller budget, $500 a month is possible with an investment of as little as $65,280 with a blended annual yield of 9.2% from the three stocks I’ll be discussing today. They all pay dividends monthly.

This strategy best suits investors who aren’t too conservative and are willing to take on a little bit of risk for more yield. If you have a medium-to-long horizon and you believe that we will move into a lower-rate environment, these three stocks are worth looking into. Ideally, you’d want to pair up these stocks with other lower-yield, more stable companies.

EPR Properties (EPR)

EPR Properties (NYSE:EPR) is a REIT. Real estate scares a lot of people, but the industry has learned a lot from the Great Recession, and it would be unwise to leave real estate stocks out of your portfolio entirely. Many investors are scared to go into real estate companies, so EPR is still 37.6% off its pre-pandemic peak. The company mostly invests in “experiential properties,” i.e. parks, movie theatres, and ski resorts.

The stock has recovered by over 17.8% year-to-date due to dividend stocks being popular again. The discount is also hard to ignore as EPR makes progress on improving its fundamentals. It is a great fit for income-focused investors who are prioritizing monthly cash flow over rapid growth and those bullish on post-pandemic leisure demand and declining interest rates (reduces borrowing costs for REITs). Admittedly, it does come with some risk, but it is much safer than it was in 2008 or even 2020 at current levels.

The stock currently yields 6.82% annually and pays monthly. It is the lowest-yielding dividend stock on this list, but it’s still worth buying due to the upside potential as it recovers. The stock could stay flat or decline slightly if the Fed maintains a higher for longer posture. But the dividend is too fat to ignore and is one of the most balanced high-dividend stocks you can buy.

Analysts expect 3.62% FFO growth this year. While revenue growth is expected to decline by 5.45%, it is expected to fully recover and start expanding again through 2027. Recent real estate data came in above estimates, so it’s possible that EPR could also outperform.

Diversified Royalty Corp (BEVFF)

Diversified Royalty Corp (OTCMKTS:BEVFF) is a company that acquires predictable royalty streams that grow over the long run.

The business model is quite straightforward,  but it has been effective. The company provides upfront capital to businesses. In exchange, they give a percentage of their top-line revenue. This ends up as recurring cash in the company’s coffers, and it’s not directly tied to the profitability of the underlying businesses but rather their sales volume. This business model has allowed Diversified Royalty Corp to pay fat dividends.

The stock has a dividend yield of 9.16% and pays monthly. It has solid operating margins at 89.64% and a net margin of 49.26%, which should allow it to pay out dividends regularly to its shareholders.  The payout ratio is pretty high, but dividends are unlikely to be reduced too much due to the business model, even if the market is in turmoil.

The company’s foremost objective is to pay a stable dividend to shareholders and increase the payout as cash flows increase over time. The asset-light royalty model is also a good hedge against inflation.

Ellington Financial (EFC)

Ellington Financial (NYSE:EFC) doesn’t have the highest safety, but it is a good choice if you just want a high dividend yield. The stock comes with an 11.6% dividend yield, and it has maintained its dividends for 12 years.

The stock is on the caboose of this article since the drawback of that double-digit dividend yield is that it is unlikely to stick around during turmoil. The company nearly halved its monthly dividends during the pandemic. The stock is down nearly 31% from its 2021 peak, and management has cut its dividend payouts.

Regardless, the yield is still pretty solid. It’s enticing enough to drive up the stock if investors feel hungry for yield. I’m bullish here as the housing market seems to be recovering, and rate cuts could boost that recovery even more. New residential construction increased 11.2% to 1.5 million (annualized) in February.

Building permits were also above estimates, and we haven’t seen such numbers out of the real estate industry in many quarters.

Regardless, EFC is still the riskiest stock of the three, but if you want an 11.6% yield, you won’t find any stock with truly “safe dividends.”

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