It’s no secret that interest rates are slumping. Many banks offer no return on savings accounts nowadays. Even certificates of deposits and government bonds often yield 1% or less in today’s environment. With that in mind, investors are looking to other types of assets to fill the income gap. Monthly dividend stocks are one appealing option. With a nice mix of them, income comes in regularly, offering an ideal paycheck substitute. And many generate yields far higher than fixed income.
Before loading up a portfolio full of monthly dividend stocks, however, do consider this. The dividend stock space tends to be full of small companies with more limited operating histories and less robust financial pictures. The March market collapse was difficult on monthly dividend companies; quite a few either cut or eliminated their dividends.
As such, a prospective investor should consider their investments in the monthly dividend arena closely. The good news, though, is that many monthly dividend companies have continued to prosper despite the novel coronavirus. These seven monthly dividend stocks offer investors a strong income stream today and the possibility of significant capital gains going forward:
- Shaw Communications (NYSE:SJR)
- Realty Income (NYSE:O)
- Stag Industrial (NYSE:STAG)
- TransAlta Renewables (OTCMKTS:TRSWF)
- Gladstone Land (NASDAQ:LAND)
- Global Water Resources (NASDAQ:GWRS)
- Grupo Aval (NYSE:AVAL)
Let’s look at what makes each among the best dividend stocks to buy for income-seeking investors.
Monthly Dividend Stocks to Buy: Shaw Communications (SJR)
Dividend Yield: 4.5%
There aren’t a lot of large household names in the monthly dividend payers camp. By and large, it’s either small companies or niche financial businesses that offer monthly dividends. Fortunately, however, there are a couple of exceptions. Shaw Communications is one of those. The company sports a $10 billion market capitalization at this time.
And while it may not be widely known in the U.S., Shaw is one of the big four Canadian telecom firms. This makes it a classic blue chip holding, as internet and cable demand tends to be steady regardless of economic conditions. None of the big U.S. telecom companies pay monthly dividends; however, Shaw fills the gap for investors willing to venture north.
SJR stock initially dipped on the pandemic. However, shares have recovered strongly in recent weeks. Even so, the stock yields well over 4% per year. Shaw Communications is not a flashy pick by any means. But for investors seeking to build out a portfolio of monthly dividend paying stocks, a blue chip stock that yields 4.5% is a great place to start.
Realty Income (O)
Dividend Yield: 4.5%
Shaw is the best-known Canadian monthly dividend payer, and Realty Income is its U.S. counterpoint. Realty Income wisely branded itself as “The Monthly Dividend Company” and has a special page on its website devoted to its monthly dividend commitment. The firm is naturally suited to meet this commitment, as its business model revolves around owning high-quality properties and charging tenants small annual rent increases as part of long-duration contracts. This naturally creates additional cash flow to support a growing dividend.
Since going public, Realty Income has paid a dividend for 600 consecutive months. It doesn’t hold the dividend steady either. In fact, it has increased its dividend 107 times over the decades. So when you see that starting yield, keep in mind that it tends to enjoy small steady boosts on a frequent basis.
Is this the best time ever to buy Realty Income stock? Probably not. The retail sector is going through a bloodbath right now. However, Realty Income is in a stronger position than many other retail real estate investment trusts (REITs). That’s because it doesn’t own shopping centers or malls outright — instead it owns individual buildings with strong tenants such as Walgreens (NASDAQ:WBA), Walmart (NYSE:WMT) and Dollar General (NYSE:DG). The Retail Apocalypse won’t be coming for these sorts of essential stores anytime soon.
So Realty Income is less exposed to the current brick and mortar slump. Still, as landlords work through their excess property inventory in coming quarters, it could put a drag on Realty Income’s results as well. For now, however, the dividend appears to be secure. As such, Realty Income is still a worthwhile cornerstone holding for many people seeking monthly dividends. It’s one to have on your watchlist during the next correction.
Stag Industrial (STAG)
Dividend Yield: 4.3%
Many REITs have been pounded in 2020. That’s understandable. The current economic slowdown has absolutely battered large chunks of the economy. Who wants to own malls, shopping centers, or offices given the current economic environment?
However, Stag Industrial is positioned to profit from these trends. Instead of owning vulnerable real estate, Stag’s holdings are largely beneficiaries of the economic transformation. That’s because Stag has concentrated its capital in warehouses and similar distribution and logistics assets. According to a recent corporate presentation, 43% of Stag’s real estate is directly involved in e-commerce activity.
STAG stock has recovered all its pandemic-induced losses. However, unlike many e-commerce plays, Stag’s shares haven’t really burst to new all-time highs yet either — shares are merely back to where they were in February. With folks now recognizing the accelerated shift to e-commerce, Stag’s real estate is well-positioned. I expect more dividend investors to discover Stag in coming months, pushing the share price higher. For now, Stag still offers an attractive 4.3% yield.
TransAlta Renewables (TRSWF)
Dividend Yield: 6.0%
Let’s turn back to Canada for the next pick. The idea of monthly dividends has really caught on in Canada. While many of their monthly dividend payers are small and not well-known companies, the sheer volume of them make it worth exploring further. And in TransAlta Renewables, there’s another worthy candidate for international investors to look into.
TransAlta has a portfolio of wind, solar, gas and hydro that is broadly diversified. It has projects across Canada, along with a few in Australia and the United States. Wind currently accounts for half of revenues, with the other power sources filling out the balance.
Diversified power generation is a good source of stable cash flows, making the company an ideal monthly dividend payer. Additionally, with the rise of environmental, social, governance “ESG” investing, renewables are a hot category right now. Throw in the decline of the oil industry, and major fund managers are looking to reallocate their holdings toward greener options. In TransAlta, investors can join that trend while collecting a major income stream at the same time.
Gladstone Land (LAND)
Dividend Yield: 3.3%
Electricity generation is one recession-resistant industry. Another good one is food. None of the major packaged food companies currently offer monthly dividends. However, we do have the next best thing, Gladstone Land.
Gladstone owns a broadly diversified portfolio of farmland across the United States. Unlike some other land operators, Gladstone hasn’t just concentrated on commodity crops like corn or wheat. Instead Gladstone has included a ton of specialty crops in there as well. For example, Gladstone’s latest land purchase was a major Californian pecan orchard, adding more than 500 acres of high-value agriculture to the portfolio.
Over the years, as Gladstone has assembled its farming acreage, it has been able to distribute a healthy payout to shareholders. Even with the stock trading up lately, it still yields a nutritious 3.3%. If you’re looking for recession-resistant monthly dividend stocks that add significant inflation protection to your portfolio, consider LAND stock.
Global Water Resources (GWRS)
Dividend Yield: 2.7%
Global Water Resources is a nice addition to a monthly dividend portfolio. That’s because it’s a small and rapidly growing water utility. That makes it quite different from most of the other sorts of firms that elect to pay monthly yield.
Global Water launched in 2003 providing water utilities to the then newly incorporated Phoenix suburb of Maricopa. Over the years, through acquisitions, the company has built out its coverage range and now serves about 50,000 individual water taps in suburban Phoenix and Tucson. It has infrastructure already in place for much more than that, meaning that the business will scale nicely as more houses and other urban development spring up in Global Water’s coverage areas.
And speaking of more developments, there’s plenty in the pipeline. The most exciting is the Arizona Inland Port. This is a project to bring heavy manufacturing to the Phoenix area. The federal government has showered nearly $40 million in subsidies on the project to fund things such as direct connections to Phoenix’s international airport.
The star attraction at the Inland Port is Nikola (NASDAQ:NKLA). Yes, the electric vehicle firm Nikola. It held the ground-breaking ceremony for its $600 million manufacturing plant in July. That plant will use Global Water’s services. Plus Global Water has the service rights for much of the land in the immediate vicinity around the plant. As new suburbs, shopping and government services spring up to take care of the factory’s workers, Global Water will get to provide utilities for them as well.
Global Water stock is still cheap because people are looking at its small present size. However, Nikola’s factory should usher in a major growth wave. And for dividend investors, there’s already a considerable income stream flowing in from the stock today.
Grupo Aval (AVAL)
Dividend Yield: 7.2%
Rounding out the list, we have a true under-the-radar name. Colombia’s Grupo Aval is that nation’s largest bank holding company. It owns the majority stake in various Colombian banking franchises, which amount, in aggregate to 25% domestic market share. Grupo Aval also owns subsidiaries in various other businesses such as insurance and infrastructure. In addition, it’s the largest bank holding company in Central America. Aval remains 80% owned by its founder, Luis Sarmiento, who is also Colombia’s wealthiest man.
Sarmiento’s net worth had topped $10 billion, at least before Aval’s stock price tumbled this year. However, with shares down around 40% on the year, it offers outside investors the chance to ride along with Sarmiento’s monthly dividend machine. Colombia is a highly attractive market for banks, as the government has largely prohibited foreign banks from competing. Thus, just three Colombia banking firms hold more than 60% of the market and can earn fat profit margins.
Colombia’s fortunes have dimmed somewhat this year. The pandemic has caused the nation to be under strict lockdown orders since March — making it one of the most vigilant countries in response to the virus. The fall in oil prices has also hurt. In better days, Colombia got half its export dollars from selling oil. Still, things will turn around sooner or later for the country.
In the meantime, its banking conglomerate Aval is offering a 7% dividend paid monthly. AVAL stock sells for just 7x trailing earnings. And with the country’s richest man at the helm, you know Aval has the capability to manage its way through volatility. On the other side of this downturn, investors should enjoy strong returns once emerging markets get going again. That makes AVAL stock one of the more promising monthly dividend stocks to buy.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. At the time of this writing, he owned GWRS, WBA, and AVAL stock.