[Editor’s note: “8 Monthly Dividend Stocks to Buy for Consistent Income” was previously published in October 2019. It has since been updated to include the most relevant information available.]
With the U.S.-China trade war still alive and interest rates still quite low, the idea of buying dividend stocks is an attractive one. Primarily, as passive-income generating securities, dividend-bearers are likely to weather volatility better than stocks that don’t offer payouts. Plus, any capital returns are bonuses on top of the yield.
However, dividend stocks typically have one glaring weakness, especially for those who depend on stocks for income: their payouts occur on a quarterly basis. That’s not particularly helpful when our society revolves around monthly cost expenditures, such as mortgages, car payments, and utility bills. And that’s one of the reasons why monthly dividend stocks are so attractive.
Under this arrangement, you’re receiving income 12 times a year as opposed to the usual four times. Because money has a time component to it, monthly dividend stocks allow investors much more flexibility. Also, if you like to reinvest dividends into more shares of the target asset, a monthly schedule allows you to advantage technical dynamics, such as a pricing dip.
That said, conservative investors should adopt the same precautions toward monthly dividend stocks as you would any income-generating investment. For instance, you should never jump aboard a company or fund merely because they pay out monthly. The key here is healthy cash flows and robust, stable sectors.
At the same time, monthly dividend stocks offer speculators a reason to join in on the fun. With payouts every 30 days, sometimes risky, high-yielding names offer compelling opportunities. Of course, that depends on your personal tolerance to volatility.
And with these cautionary notes out of the way, here are the eight best monthly dividend stocks to consider.
LTC Properties (LTC)
When it comes to boring sectors as I mentioned above, I can’t think of anything more sleep-inducing than senior care. At the same time, I can’t think of anything more robust and relevant than the senior care market. That’s why investors ought to take a long look at LTC Properties (NYSE:LTC) and LTC stock.
As a viable name among monthly dividend stocks, LTC Properties utilizes a powerful tool as leverage: demographics. Baby Boomers are retiring in droves, which present serious challenges. But they also present opportunities. Increasingly, millennials are taking care of their aging family members, indirectly bolstering the case for LTC stock. That’s because a senior may not have adequate funds, but a working millennial might.
Furthermore, LTC stock has steadily trekked higher since the collapse of the 2000 tech bubble. Given the demographic tailwinds, I expect this longer-term trend to continue.
Main Street Capital Corporation (MAIN)
Main Street Capital Corporation (NYSE:MAIN) is what experts refer to as a business development company. In this case, Main Street provides debt and equity financing to small and mid-tier private organizations. With a broad range of services, they’re able to help scale businesses as their output expands.
And supporting the case for MAIN stock is the current entrepreneurial environment. With the advent of e-commerce technologies, and the digitalization of everything, there’s never been a better time than now to start a business. Moreover, the efficiencies inherent in smaller and more nimble organizations allow them to disrupt larger entities. Again, this supports the capital gains narrative for MAIN stock.
Just as importantly, the underlying company has a track record for delivering the goods under pressure. For instance, Main Street first offered MAIN stock to the public in 2007. While incurring volatility during the financial crisis, shares fought back. Today, it pays out a healthy dividend monthly that yields nearly 5.7%.
Realty Income (O)
Whenever discussions about monthly dividend stocks come about, it’s almost inevitable that you’ll hear the name Realty Income (NYSE:O). And that’s for good reason. Although a boring name, strong and consistent cash flows back up O stock. Obviously, this is critical for a company paying out monthly; after all, the money for dividends has to come from somewhere!
But O stock has two reasons why it’s especially relevant at this juncture. First, the Federal Reserve is likely to lower interest rates despite robust domestic economic metrics. Global economies don’t necessarily share the same optimism as the U.S. Furthermore, the Fed is determined to learn the lessons that led to the disastrous 2008 financial crisis. Thus, investors seeking substantive yields will probably gravitate toward investments like O stock.
Second, many of the commercial properties that Realty Income owns feature retailers who have competitive or natural moats against e-commerce threats like Amazon (NASDAQ:AMZN). For example, Home Depot (NYSE:HD) customers like to see and test out their prospective products. You simply don’t get that convenience from online channels. And this dynamic should keep the rent money flowing into O stock, which bolsters the dividend payout.
Shaw Communications (SJR)
Canadian cable company Shaw Communications (NYSE:SJR) is another name that frequently pops up among recommended monthly dividend stocks. It’s not hard to see why. Currently, SJR stock has a dividend yield of 4.5%.
SJR stock should prove to be incredibly relevant in the years ahead. While cable is a dying industry due to the streaming revolution, Shaw levers a wireless subsidiary called Freedom Mobile Inc. And in April of this year, Freedom substantially expanded its wireless footprint in the Canadian market. This move improves Freedom’s LTE service and lays the groundwork for the upcoming 5G rollout.
Finally, Shaw is a name that delivers a consistent revenue and earnings stream. As a result, it generally features reliable free cash flow — which is key for stocks that pay out monthly. And while cord cutting hurts SJR stock in the nearer-term, I believe its spectrum coverage will outweigh these concerns.
Pembina Pipeline (PBA)
In years past, the oil market used to be a no-brainer: we consume energy and therefore we need energy. However, rising global supplies have depressed prices, making this sector a tough call. But infrastructural plays like Pembina Pipeline (NYSE:PBA) typically offer stability.
No matter what happens in the underlying market, transportation of energy-related commodities is vital. In recent years, this dynamic supported the bullish case for PBA stock.
Still, some risks cloud the narrative for PBA stock. First, shares have done well this year, moving up 19% year-to-date. But the equity has demonstrated some notable volatility in recent sessions. Thus, prospective buyers may want to wait a little before pulling the trigger.
Further, Pembina doesn’t have the greatest balance sheet. With a total debt to total equity ratio of 63, I wouldn’t go all in on PBA stock. That said, energy remains a viable long-term play due to the uncertainties of renewable alternatives. Therefore, Pembina is among the riskier monthly dividend stocks that nonetheless deserves a careful look.
Colony Credit Real Estate (CLNC)
For those who are interested in higher stakes — and of course, higher yields — you should check out Colony Credit Real Estate (NYSE:CLNC). CLNC stock provides shareholders exposure to the world of commercial real estate credit REITs, or real estate investment trusts. Essentially, the company finances and manages commercial real estate debt.
Now, I must give you some cautionary notes for CLNC stock. First, shares have not enjoyed the greatest time since its introduction in early 2018. A massive collapse in November of last year, along with the rest of the markets, has not inspired confidence.
Also, as a commercial debt investor, Colony Credit faces turbulence from a possible downturn in the economy. With most folks talking about at least a correction coming up, CLNC stock is only for the risk tolerant.
However, shares have stabilized this year and has recently inched forward. Plus, with a yield of 8.7%, CLNC is one of the monthly dividend stocks that will consistently draw eyeballs.
Armour Residential REIT (ARR)
If you want another high-stakes REIT among monthly dividend stocks, but with a residential angle, consider Armour Residental REIT (NYSE:ARR). ARR stock gives you exposure to mortgage-backed securities which are backed by a federal entity, such as Fannie Mae or Freddie Mac.
Of course, whenever anyone hears the term mortgage-backed securities, the last housing crisis comes immediately to mind. Certainly, no investment is foolproof and that should give you pause before diving into ARR stock.
On the flipside, both the government and the mortgage industry have taken the lessons of the last decade to heart. Today, it’s very difficult to quality for a mortgage unless you’ve got your financial house in order. Additionally, homeowners themselves have learned not to overextend themselves. Thus, this environment helps bring some confidence toward ARR stock.
Lastly, Armour Residential has a history of consistently rich monthly payouts going back to 2015. But I wouldn’t get too comfortable as the payouts have declined in value over this time. Also, ARR stock is down nearly 14% YTD. All that said, if you’re willing to assume the risk, Armour is an interesting play due to the current economic resiliency.
Mesa Royalty Trust (MTR)
A far riskier counterpart to Pembina Pipeline, Mesa Royalty Trust (NYSE:MTR) is truly an investment only for the hardened speculator. From the get-go, MTR stock screams caution.
Let’s start with the obvious. Mesa Royalty distinguishes itself from the other monthly dividend stocks on this list because the company doesn’t own anything. Instead, it has an interest in oil and natural gas projects dispersed throughout the U.S. Basically, the dividend from MTR stock represents a share of the spoils from the facilities’ output.
This leads to my next concern about MTR stock: volatility. I’m not just talking about the share price, which historically is terrible. The payout fluctuates like mad. Needless to say, Mesa Royalty will not belong on a list of stable dividend stocks anytime soon.
Still, the company offers the prospect of a big payday that could arrive at any month.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.