The 7 Best Dividend Stocks for Monthly Income

dividend - The 7 Best Dividend Stocks for Monthly Income

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Monthly dividend stocks are popular with investors – and with good reason. Monthly payments line up better with monthly bills, particularly for retirees living off investment income. Over time, there’s even a modest incremental benefit from compounding, particularly for investors successfully using DRIP plans.

The catch is that there aren’t all that many monthly payers, which limits the options for investors. Most monthly payers are REITs of some kind – and a good chunk are mortgage REITs, which are facing rising interest rates.

Some ETFs also offer monthly distributions, but may not be suitable for investors who see an edge in stock-picking.

Still, there are attractive stocks with monthly dividends out there. These seven dividend stocks also offer strong yields paid monthly – and a bull case for capital appreciation as well.

Best Dividend Stocks for Monthly Income: Realty Income (O)

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It’s tough to make this list without Realty Income (NYSE:O). Indeed, when I reviewed the space last year, O stock led off the list as well.

After all, Realty Income’s slogan is “The Monthly Dividend Company”. And historically it’s been the best performer of the group. Over the past ten years, O’s total return has been 237%. Since its inception in 1994, O shareholders have gained almost 3,000%.

And yet, O looks reasonably cheap, as its performance has stalled out of late. Realty Income stock actually hit a two-year low in early February, before rallying nearly 10% since.

There’s reason to see that rally continuing. O offers an attractive yield just over 5% – a rare figure for the stock this decade. The company closed 2017 with over 5,000 properties and 247 tenants, offering significant diversification which moderates risk. And yet the stock trades at just 16.3x the midpoint of 2018 FFO guidance – which, too, is one of the lowest figures seen this decade.

Indeed, at these levels, O stock simply looks like a buy. The monthly dividend payments are just the cherry on top of the sundae.

Best Dividend Stocks for Monthly Income: Permian Basin Royalty Trust (PBT)

Up front, investors need to be aware of the risks in Permian Basin Royalty Trust (NYSE:PBT). Like most royalty trusts, PBT owns depleting assets – in this case acreage in Texas’ Permian Basin. Investors own units, not shares of stock, which can add tax complications.

Distributions aren’t fixed, but rather fluctuate month to month. And PBT is highly sensitive to the price of oil and the production in its fields by a subsidiary of ConocoPhillips (NYSE:COP).

All that said, PBT has a lot to offer. The March distribution projects to an annual yield over 9%. Investors bullish on oil prices can use PBT as a direct play, which takes away some of the internal hedges in stocks like COP or Exxon Mobil Corporation (NYSE:XOM). And unlike some trusts which have been yield traps like BP Prudhoe Bay Royalty Trust (NYSE:BPT), production still is growing – as are distributions, for the most part.

Again, this isn’t a stock where investors can simply focus on the 9%+ yield and see value. But given what look like strong reserves and a solid outlook for crude, there should be value in PBT.

Best Dividend Stocks for Monthly Income: EPR Properties (EPR)

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EPR Properties (NYSE:EPR) has had a rough go of it of late. Indeed, EPR stock is down 26% over the past year.

There are a number of reasons for the decline. Movie theater operator AMC Entertainment Holdings Inc (NYSE:AMC) drives 20% of rental revenue, according to the EPR 10-K. And with that stock tanking – and highly leveraged – investors clearly are concerned about the risk of an AMC bankruptcy and the impact it would have on EPR.

That’s not the only risk at the moment. EPR owns the Schlitterbahn water parks – and disclosed this week that murder charges against that company’s operators could jeopardize its mortgage.

Adding to that, 2018 adjusted FFO guidance took a hit from the bankruptcy of Children’s Learning Adventures.

But it’s not hard to believe that the risks are getting priced in at this point. I still think AMC will be just fine with a better movie slate. Schlitterbahn represents just 3% of revenue. And the bankruptcy issue with CLA will be resolved at some point in 2018.

Meanwhile, EPR offers an attractive 7.85% yield and trades at less than 11x that lowered 2018 guidance. EPR may not see a near-term rebound, as lower net investment spending this year could hurt 2019 FFO and dividend growth. But patient investors will have a path to upside in the mid- to long-term – and some nice monthly checks while they wait.

Best Dividend Stocks for Monthly Income: LTC Properties Inc (LTC)

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Healthcare REIT LTC Properties Inc (NYSE:LTC) is another stock I recommended last year – and that recommendation has not aged well. LTC has headed pretty much straight down since then, and trades at a three and a half year low.

Here, too, there are some short-term worries. Tenant Preferred Care Partners filed for Chapter 11 bankruptcy last year amid a flurry of lawsuits. LTC issued a default notice on another tenant, Anthem Memory Care. Per the LTC 10-K, the two companies combined generate nearly 14% of total rental revenue.

But LTC has said that Preferred Care will not hurt its results – and disclosed in the 10-K that the business remained current on rent. Anthem’s performance is improving, according to the Q4 conference call.

And so it seems like investors are tossing the baby with the bathwater here. LTC yields over 6%, and trades at less than 13x 2018 FFO guidance of $2.95-$2.97. For a company with an impressive track record and growing demand for skilled nursing and assisted living facilities, that seems too cheap. Patient investors could try and time the bottom here.

Best Dividend Stocks for Monthly Income: Global Net Lease Inc (GNL)

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Global Net Lease Inc (NYSE:GNL) isn’t perfect. An external management arrangement adds another layer of expense – and risk. Both FFO and the dividend have been relatively flat for years now. As a result, GNL has sold off rather steadily over the past few years.

But as far as so-called “triple net REITs” go, GNL is as cheap as it gets. And with an 11% yield, there’s reason to see a bottom. GNL trades at a ~25% discount to analyst estimates of NAV (net asset value). And with modest exposure to retail, there should be some safety in the diversified portfolio.

Again, there are risks here. GNL is ramping up its acquisition strategy this year, aiming for ~$500 million in new investment. That will increase leverage – and both potential risks and rewards.

Rising interest rates could have an impact. And I can see why investors might look elsewhere in the triple net space, paying a premium to get away from the external management model. But with a big yield, and monthly payments, GNL at the least is worth a long look.

Best Dividend Stocks for Monthly Income: Whitestone REIT (WSR)

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Whitestone REIT (NYSE:WSR) is another high-yielder, yielding 10.75% at the current price. The company owns shopping centers in the Houston, San Antonio, Austin, Dallas and Phoenix metro areas.

But a focus on neighborhood shopping centers minimizes the REIT’s exposure to the struggling retail space. Just 15% of revenue comes from specialty retail. Grocers like Kroger Co (NYSE:KR) drive 12%, and services and entertainment another 32%.

Here, too, growth has been tepid, both in terms of FFO and distributions. But Whitestone is promising to cut G&A, which is helping profits already in 2018. And with same-store sales still growing, there’s a way to grind out some growth going forward.

Near an all-time low, and at barely 10x FFO, that’s all Whitestone needs. And if it can drive some success, there’s a case for big upside in the stock in addition to a solid monthly yield near 11%.

Best Dividend Stocks for Monthly Income: Gladstone Land Corp (LAND)

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Gladstone Land Corp (NASDAQ:LAND) has an interesting business model. The company buys and leases farmland across the U.S.

So far, the results have been mixed from a long-term standpoint. LAND actually trades at a discount to its IPO price. But the stock has nearly doubled off early 2016 lows, with the dividend increasing along the way. Meanwhile, Farmland Partners Inc (NYSE:FPI), which has a similar business model, has struggled with leverage and slowing growth.

As a result, LAND trades at a premium to FPI, and a 4.2% dividend yield isn’t quite as attractive as those offered elsewhere. But this appears to be a case of investors paying for quality, and LAND at least has its dividend solidly covered by FFO.

Assuming farmers finally get some help from inflation (and given that LAND should have limited impact to crops targeted by Chinese tariffs), LAND’s recent success should continue, and benefit patient investors.

As of this writing, Vince Martin has no positions in any securities mentioned.

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