There are no two ways about it. The novel coronavirus has been brutal on the U.S. economy. Not since the Great Depression has the country faced the prospect of such a prolonged slowdown. In response, the Federal Reserve slashed interest rates and went on a bond-buying spree. That helped in propping up the financial markets and providing much-needed stability. But on the flip side, with interest rates cut to the bone and government bonds yielding 1%, investors are left to invest in the equity markets to get a stable return. That’s why monthly dividend stocks are an attractive option.
But before you go ahead and fill your portfolio with dividend stocks, it would be prudent to check out their market capitalizations as well. Several companies are offering juicy yields at the moment, but many of them are smaller companies that are relatively new.
Even when hunting for the best dividend stocks, I would suggest going for companies that have a strong track record of returns, excellent management and a long history of returning capital to shareholders.
If you narrow it down, there are only a handful of companies that distribute dividends monthly and have strong dividend yields. These five monthly dividend stocks offer shareholders a steady income stream that they can bank on today, as well as tomorrow.
- Gladstone Capital (NASDAQ:GLAD)
- Healthpeak Properties (NYSE:PEAK)
- Sabine Royalty Trust (NYSE:SBR)
- STAG Industrial (NYSE:STAG)
- AGNC Investment (NASDAQ:AGNC)
Monthly Dividend Stocks: Gladstone Capital (GLAD)
Dividend Yield: 10.2%
Gladstone gives out loans to small- and mid-sized companies and provides senior term loans, senior subordinated loans and junior subordinated loans to private businesses.
GLAD stock has rebounded from a panic-induced selloff in March, but it remains well below its prior highs. So, you know that there is some upside left.
From an investor’s perspective, one of the best things about the company is its juicy 10.2% dividend yield. And this yield is unlikely to change. There was a recent dividend cut, but there are no further signs that any reductions will take place this year. The company operates a highly diversified portfolio of 48 companies in 19 different industries, so the Covid-19 impact is minimal.
Healthpeak Properties (PEAK)
Dividend Yield: 5.4%
Healthcare stocks weren’t immune to the Covid-19 selloff, but they have recovered since then. More importantly, Covid-19 has reemphasized the importance of the healthcare industry. Hence, the sector is a net gainer from the virus. People require medical attention during this time, whether due to Covid-19 or any other disease. That’s a phenomenon that will remain unchanged until we have a vaccine in the fall.
Although Healthpeak Properties does not directly own any healthcare properties, it’s sure to take advantage of this tailwind. Why? The real estate investment trust has a well-diversified portfolio, consisting of assets that are targeting the country’s elderly population.
Focusing on life science, medical offices and senior housing spaces, the portfolio will provide stable returns during and after this crisis because, demographically, we are an aging country.
Monthly Dividend Stocks: Sabine Royalty Trust (SBR)
Dividend Yield: 3.85%
The fossil fuel industry came under a lot of fire during the pandemic. Oil and gas stocks have recovered somewhat, but they are still way off 2019 highs. People are understandably skeptical of investing in this space. Safety and stability are missing from the sector.
That’s why Sabine Royalty seems the safest way to get exposure to this industry without risking excessive loss. Formed in 1982, it collects royalty interests on oil and gas properties in Florida, Louisiana, Mississippi, New Mexico, Oklahoma and Texas. The royalty collected depends on how the facilities are doing. With prices of crude oil and gas near historic lows, it’s hardly surprising fees have taken a dip.
Regardless, whatever the company makes is available for distribution after taking care of selling, general and administrative expenses, which is usually between 4% and 7% of the royalty income. That’s a desirable proposition for shareholders looking for consistently high returns.
STAG Industrial (STAG)
Dividend Yield: 4.41%
Although the broader markets have made up for a lot of lost ground, there are a few sectors that remain off-limits. One of them happens to be retail. As more people stay in their homes, retail companies that don’t have a robust e-commerce model are suffering.
On the other hand, tech giants are taking advantage of the current crisis. Due to the ramping up of deliveries, the use of warehouses is increasing. That’s why we see a lot of growth in the industrial REIT space as well. STAG Industrial is benefitting from this tailwind, but the company was already growing when the pandemic hit.
Over the last five years, STAG grew funds from operation (FFO) per share faster than peers due to its strategy of investing in Class B industrial facilities in tier 2 cities that have a better internal rate of return than those in Class A in Tier 1 cities. Counting Amazon (NASDAQ:AMZN) as its biggest tenant, it also has Ford (NYSE:F), FedEx (NYSE:FDX) and XPO Logistics (NYSE:XPO) on its roster.
You would think with all those factors highlighted, STAG Industrial would be trading at record multiples, but here’s the best part. Even after outpacing its peers, shares are trading at cheaper multiples than Rexford (NYSE:REXR) and Terreno (NYSE:TRNO). Long story short, snap up some STAG stock while you still can.
Monthly Dividend Stocks: AGNC Investment (AGNC)
Dividend Yield: 10.4%
AGNC Investment functions like a REIT but with a twist. It invests in agency mortgage-backed securities on a leveraged basis, funded primarily through collateralized borrowings structured as repurchase agreements — effectively a mortgage REIT.
In easier terms, AGNC has a business model that focuses on borrowing capital at low rates and investing it in higher-yielding securities. Any difference is then distributed to shareholders in the form of a monthly dividend. Since government agencies like the Federal National Mortgage Association (OTCMKTS:FNMA), or Fannie Mae, guarantee the security of the investments, AGNC stock is a very safe investment.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. He does not directly own the securities mentioned above.