Stocks are down. Inflation is up. High uncertainties loom. Market conditions are tough, to say the least. But whether you are looking for capital growth or income, high-yield monthly dividend stocks could help you ride out today’s challenges.
In times of volatility, these stocks can produce steady returns from their high dividend payouts. This comes in handy, whether you are looking to use the portfolio income for living expenses. Or, if you’re looking to reinvest the cash (as it could result in faster compounding).
Admittedly, this is a more arcane area of the market. Names in this area differ greatly from the dividend aristocrats and other dividend stocks you may be familiar with, or perhaps own. The lion’s share of them are either business development companies (BDCs), closed end funds (CEFs), mortgage REITs (real estate investment trusts), or oil and gas royalty trusts. Stocks in these areas come with their own unique sets of risks.
However, sifting through the hundreds of high-yield monthly dividend stocks, there are a few that are worthy of a closer look. These seven offer the potential to produce solid returns.
- Broadmark Realty Capital (NYSE:BRMK)
- Gladstone Commercial (NASDAQ:GOOD)
- Horizon Technology Finance (NASDAQ:HRZN)
- LTC Properties (NYSE:LTC)
- Prospect Capital (NASDAQ:PSEC)
- San Juan Basin Royalty Trust (NYSE:SJT)
- Special Opportunities Fund (NYSE:SPE)
High-Yield Monthly Dividend Stocks: Broadmark Realty Capital (BRMK)
Dividend yield: 10.2%
BRMK stock is a mortgage REIT, but with a unique twist. Instead of investing its capital into traditional mortgage securities, it makes “hard money” loans for real estate projects. These short-term bridge loans come with high interest rates.
Hence, the objective of Broadmark Realty Capital is to pay out this high cash flow in the form of monthly dividends. Unfortunately, by going public shortly before the pandemic, Broadmark was the victim of bad timing. Although it cut its dividend from 8 cents to 7 cents per month (84 cents annually, 10.2% yield), this amount continues to exceed its earnings.
Yet while facing challenges and in a very risky area of mortgage investment, you may want to take a closer look. As a Seeking Alpha commentator recently argued, Broadmark has a strong chance of growing its loan portfolio. This will enable it to avoid a dividend cut, which many fear is on the horizon.
Keep in mind that while different from other mortgage REITs, rising interest rates could affect BRMK stock. Although with its moderate use of debt and the short-term nature of its loans, it may seem like Broadmark will be less affected by rising rates (which squeeze net interest margins). Rising rates could dampen construction, impacting loan growth. Nevertheless keep an eye on it after its recent weakness.
Gladstone Commercial (GOOD)
Dividend yield: 7%
Currently yielding 7%, Gladstone Commercial is one of the high-yield monthly dividend stocks known for its consistency. Since launching in 2003, it has never missed a dividend payment. It has also never cut its dividend. Even in tough times, like the Great Recession, or during the pandemic.
This REIT focuses on owning and leasing out industrial and office properties on a net lease basis. It recently reported solid results, including strong occupancy numbers. Its history, plus its recent operating performance, helps to counter any concerns that trouble (i.e., a dividend cut) is on the horizon.
With this, consider Gladstone a name to buy after its recent pullback in price. That said, there are negatives to consider. Namely, don’t expect big long-term dividend growth with GOOD stock.
The REIT has raised its per share payout often in its more than 20-year history. Its tendency to sell new shares may play a role in this. For instance, in the first two months of this year alone, it issued around 228,000 new shares. Although that represents dilution of under 1%, this dilution does add up over time.
Even so, if you’re looking for a more slow-and-steady dividend stock, with a high yield to boot, you may find Gladstone Commercial to be such a play.
Horizon Technology Finance (HRZN)
Dividend yield: 8.9%
I’ve talked about Horizon Technology Finance when I last dove into high-yield monthly dividend stocks. This is a BDC, which is a combination venture capital fund and closed-end fund. It invests in/makes loans to small tech companies, paying out most of its interest income to shareholders.
With a recent drop in price since, it’s moved further into high-yield territory. Its 10-cent-per-share monthly payout equates to a 8.9% annual dividend yield.
Much of slight price decline has to do with the Federal Reserve’s rate hikes. If the Fed ends up raising rates even more, HRZN stock could see another slide in price. Especially as it continues to trade at a premium to its net asset value, or NAV.
So, with this possible “picking up nickels in front of a steamroller” dynamic, why am I including it on this list?
Horizon may not be a buy today. But if it experiences another sharp plunge, like it did during the 2020 coronavirus crash, it may fall to a “can’t miss” price. If you get in at single digits, a discount to NAV and a high yield on cost could make up for any potential downside related to rising rates or to any possible future dividend cuts.
High-Yield Monthly Dividend Stocks: LTC Properties (LTC)
Dividend yield: 6.4%
Compared to other high-yielders discussed above and below, LTC stock may seem relatively low-yield. With its 19-cent monthly payout equating to a 6.4% annual yield, this may not seem like it cuts the mustard. Not at a time when CPI prints are nearing 8%.
Yet the main appeal of this REIT, which owns senior housing and nursing properties, isn’t so much with its payout. Rather, what’s most interesting is its potential to rise back up to its pre-pandemic price level.
The pandemic severely affected its operating performance. This has resulted in it having what some see as an unsustainable dividend, at risk of a cut. These fears still run high. Despite a management team confident it can get itself back to the “old normal,” given its recent operating results, it makes sense why the market continues to view their confidence with a skeptical eye.
Then again, the sell-side is still anticipating it to see an increase in earnings and funds from operations this year. This, coupled with it continuing to maintain its dividend, may enable LTC stock, which lately has been trending higher, to make its way back to higher prices.
Prospect Capital (PSEC)
Dividend yield: 9%
Like HRZN stock, PSEC stock is another BDC that makes a monthly payout to shareholders. Except instead of trading at a premium to its net asset value, it trades for just 75% of its NAV.
To some, this may appear to be a red flag. Value investors may be salivating, but such a high discount could be a sign of future trouble. Yes, as a more diversified business development company, Prospect invests in middle-market companies across many sectors.
Prospect’s portfolio could face trouble if the inflation, interest rate, and geopolitical issues playing out today result in a recession. On top of this, the company’s performance also tarnished its reputation in the eyes of many investors. However, this bad reputation may work in your favor. The big discount may already account for risks down the road.
Although many have burned by in the past, its performance is not indicative of future results. As Louis Navellier discussed back in January, investors who got into PSEC stock after its last big dive saw high returns following its relatively fast recovery.
San Juan Basin Royalty Trust (SJT)
Dividend yield: 16.2%
With the recent spike in oil and natural gas prices, you may be looking for more exposure to energy stocks. If you’re also in the market for high-yield monthly dividend stocks, you can achieve both your objectives by buying a royalty trust like SJT stock.
As its name suggests, San Juan Basin Royalty Trust holds oil and gas royalty interests in properties located in New Mexico’s San Juan Basin. With the rebound in oil in recent weeks, SJT’s monthly payout has skyrocketed. At today’s prices, it has a forward yield of 16.2%.
Of course, there is a caveat. Its payout is not fixed. Instead, its floating, ebbing and flowing with oil prices. Sometimes, it’ll even skip distributions if production costs are too high and/or if energy prices are too low. Investors holding it during 2020 know this fully well.
With this uncertainty, SJT stock may not be a great play for those looking for dependability and consistency. However, if you’re bullish that runaway inflation and rising tensions across the globe will keep energy prices at multi-decade highs, SJT stock could be very rewarding.
You may want to buy it, as oil (and its own stock price) experiences what may be a temporary dip.
High-Yield Monthly Dividend Stocks: Special Opportunities Fund (SPE)
Dividend yield: 9.1%
Managed by Bulldog Investors, Special Opportunities Fund is unique within the CEF space. Unlike other closed-end funds, which focus on investing in a particular type of security, usually to generate high dividend income, this fund operates much like its external manager.
That is, it invests more like a hedge fund. This includes buying shares in undervalued operating companies, CEFs selling at a discount and by pursuing other special situation investments. Bulldog has a long history of shareholder activism in the CEF space. In fact, its control of SPE stock is the product of one of its past activist campaigns.
With its 11-cent monthly dividend (equating to a 9.1% annual yield) paid out using investment returns, you may be concerned its payout will go down, like it did when it cut its payout in 2019. Yet still sporting a high yield that year (8%) and with the company’s market-agnostic investing approach, SPE stock stands to keep on producing solid, high-yield returns.
Pulling back in recent months, at today’s prices it trades at a 8.26% discount to its NAV. One of the more interesting vehicles out there among monthly dividend stocks, SPE stock is a buy.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.