Regular dividend income is a staple for most investors, but even cold, hard cash has its problems.
Most stocks, mutual funds and exchange-traded funds (ETFs) tend to pay their dividends out in quarterly or annual chunks. Believe it or not, that actually can be a problem for many Americans who rely on dividend income to balance their budgets near or in retirement. That’s because many of us have trouble keeping to budget when we receive large sums of money all at once, even if “all at once” is merely every three months.
Monthly dividend stocks could be the answer.
Getting a regular inflow of cash via monthly dividends, rather than traditional quarterly payouts, can go a long way toward helping the average investor budget. And there are plenty of monthly dividend stocks out there that fit the bill — and offer decent to downright large yields to boot.
Even if you don’t need the help budgeting, monthly divided stocks benefit in another way: the faster compounding of capital. By receiving a check monthly and reinvesting it, you actually end up ahead of quarterly payers.
The appeal of monthly payments is there, one way or another. Investors just need to take the plunge. With that in mind, here are seven interesting monthly dividend stocks to consider if you’re looking for a more frequent influx of income.
Monthly Dividend Stocks With Great Yields: Realty Income (O)
Dividend Yield: 3.5%
No list of monthly dividend stocks should start without the “monthly dividend company,” Realty Income Corp (NYSE:O).
Realty Income has paid out monthly dividends for 47 years. That payout has been delivered every single month, like clockwork, adding up to more than $4.1 billion paid out to investors.
Powering those monthly payouts is O’s massive portfolio of real estate. Realty Income owns more than 4,600 properties, mostly of the single-tenant variety (like your local Taco Bell). Realty Income’s freestanding properties include everything from convenience stores and restaurants to movie theaters, and automotive parts and services centers.
The real beauty is that O is a triple-net lease king. That means that the tenants — not Realty Income — are responsible for the taxes, maintenance and insurance on the property. REIT investors love triple-net leasers because they produce juicier margins.
As a result, Realty Income is unstoppable on a cash-flow basis. Adjusted funds from operations (AFFO) jumped another 4.4% this past quarter. That allowed Realty Income to increase its dividend for the 75th consecutive quarter.
If you own just one monthly dividend payer, O stock should be it.
Monthly Dividend Stocks With Great Yields: Shaw Communications (SJR)
Dividend Yield: 4.5%
The telecommunications sector historically has been a great breeding ground for dividends. Predictable fixed costs and demand allow telcos to pay out reliably. The problem is, most telecoms aren’t monthly dividend stocks.
Shaw Communications Inc (USA) (NYSE:SJR) is.
While Shaw isn’t a household name here in America, it’s a superstar in Canada. It provides TV, phone and internet services to more than 3.2 million Western Canadians. And as one of the largest telecom firms in Canada, Shaw generates some pretty hefty cash flows from its operations.
But SJR isn’t just another boring “triple play” provider. The firm is undergoing a major transformation that should help it keep growing its profits over the long-term. Shaw recently sold off its cable television and media assets and made a big bet on providing wireless communications via a buyout of Wind Mobile. While a smallish mobile player in Canada, SJR has the capabilities to expand the business immensely over its customer base.
Thus, SJR could be a great mixture of growth and monthly income.
Monthly Dividend Stocks With Great Yields: Armour Residential REIT (ARR)
Dividend Yield: 11.6%
Monthly dividends are nice, but rarely are they gigantic. That’s not the case with Armour Residential REIT, Inc. (NYSE:ARR).
ARR is a real estate company, but it doesn’t own physical properties. Instead, Armour Residential is a so-called mortgage REIT (mREIT).
Mortgage REITs invest in mortgage-back securities or lend money to other developers to build shopping malls, apartments and other properties. Armour, for instance, invests in agency mortgage-backed securities (MBSes) — essentially, the bonds tied to people’s homes. While that might sound risky (OK, it is to a point), know that the bulk of ARR’s assets are invested in securities issued or guaranteed by U.S. government-sponsored entities and Ginnie Mae.
Armour produces its high monthly yield via leverage. It borrows money — currently at rates near 0% thanks to the Federal Reserve — and uses the proceeds to buy higher-yielding mortgage bonds. The difference is ARR’s profit.
There’s risk aplenty there, too, such as repayment, defaults and higher interest rates, so Armour isn’t a slam dunk. But you don’t get double-digit yields without sticking your neck out a little, so if you have some risk tolerance, ARR could be a great way to get substantial monthly income.
Monthly Dividend Stocks With Great Yields: LTC Properties (LTC)
Dividend Yield: 4.2%
It often pays to focus on mega-trends when scouting stocks to buy. For instance, many great investments right now focus on the “graying” of America.
LTC Properties Inc (LTC) is one such pick that pays you every 30 days or so.
LTC invests in the senior housing and assisted living facility sectors of the healthcare property market. Currently, the firm owns/invests in roughly 200 properties that are right in the sweet spot for the nation’s aging baby boomers. Demand for these facilities continues to grow as more and more seniors need aid to get along.
LTC takes a multi-pronged approach to investing these sorts of facilities. That includes writing mortgages for developers, conducting sale-lease transactions or providing redevelopment/mezzanine financing. Also, LTC focuses on smaller deals in the $10 million to $100 million range.
The results have been spectacular. LTC’s stock has climbed 120% in five years, and the payout on its monthly dividend has gone up by about 30% in that time.
Monthly Dividend Stocks With Great Yields: Gladstone Capital Corporation (GLAD) and Gladstone Commercial Corporation (GOOD)
Dividend Yields: 10% (GLAD) and 8.4% (GOOD)
David Gladstone may not be a household name, but there’s a good chance that you’ve somehow been used in or been privy to one of his investments.
Gladstone has been dealing in business development for many years, and he has served on the boards of several of the biggest business development companies (BDCs). In a nutshell, BDCs specialize in offering loans to small and mid-sized businesses.
Gladstone Capital Corporation (GLAD) and Gladstone Commercial Corporation (GOOD) both have roles in servicing these kinds of businesses:
- GLAD, which actually is a BDC, supplies debt financing to these small and mid-sized businesses. Typically, Gladstone Capital will make senior loans and other “high in the capital structure” IOUs.
- GOOD will either lend money to small and mid-sized property developers or engage in triple-net sale-leaseback transactions.
The pairing of the two provides a one-two punch of private equity-style investing … and results in some hefty monthly dividends.
GLAD (a BDC) and GOOD (a REIT) are both structured as pass-through entities, which means most of their cash flows are required to be kicked back to investors. Hence the high yields. Yes, the monthly payouts have been stuck in neutral since 2011, but the duo still offer investors a chance to score high monthly dividends from businesses they can’t normally can’t invest in.
Monthly Dividend Stocks With Great Yields: Goldcorp (GG)
Dividend Yield: 0.42%
OK, in fairness, Goldcorp Inc. (USA) (NYSE:GG) currently boasts a really crummy yield of less than 1%.
Just hear me out.
Goldcorp is a double-whammy play on both higher yields in the future, as well as some capital appreciation. You see, GG actually has paid out monthly dividends — an absolute rarity in the gold mining space — for more than a decade. And the yield used to be much higher, in the 3% range. However, as gold prices tanked over the past few years, Goldcorp took punches to both cheeks. Its share price was decimated, and the monthly payout necessarily had to shrink.
That said, gold is finally enjoying something of a renaissance this year, with the yellow metal up around 25% so far in 2016. GG shares are up 63% this year as a result, and there’s good reason to believe that dividend will be hiked sooner than later. Goldcorp’s low all-in cash costs, strong production portfolio, rock-solid balance sheet and liquidity are among the arguments.
This is the least sure thing among the monthly dividend stocks we’ve covered, but it’s also one of the most interesting and potentially lucrative plays.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.