The investment choices are limited for those investors who need more regular distributions of income as the vast majority of securities make quarterly dividend payments. However, there are approximately 50 companies that offer monthly dividend stocks.
Monthly dividend stocks can work to the investor’s advantage, especially if they require more consistent cash flows.
Even better, many of these stocks provide yields that are several times the 1.3% average yield for the S&P 500.
Some of our favorite high-yield monthly income names include:
Monthly Dividend Stocks: EPR Properties (EPR)
First on our list of high-yield monthly dividend stocks to discuss is EPR Properties, which specializes in owning and developing experiential properties in the U.S. and Canada. The trust has a market capitalization of $3.9 billion and generates annual revenue of more than $530 million.
EPR Properties is a specialty real estate investment trust, or REIT, in that it focuses on properties that can be used for entertainment, recreation and education. The trust’s leases are structured as a triple net, meaning that the tenant is responsible for all of the costs associated with the property. This includes rent, maintenance and taxes. EPR Properties essentially acts as a landlord with the primary responsibilities of identifying new properties to invest in and tenants to fill vacant spaces.
As of the most recent quarter, EPR Properties had $7 billion invested in more than 300 locations in 44 U.S. states. The trust counts more than 250 separate tenants in its portfolio, providing EPR Properties with a highly diversified business model. The trust has been in business for more than 20 years, so leadership has vast experience in finding, developing and renting highly specialized properties to meet market demand.
That said, EPR Properties did struggle during 2020 during the worst of the Covid-19 pandemic. Movie theaters (45% of properties) and eat-and-play tenants (28% of properties) were some of the most impacted business types when social distancing restrictions were implemented. Revenue fell 40% for the year.
The good news is that EPR Properties experienced a strong rebound last year as revenue grew 29% for 2021. While top-line performance hasn’t reached pre-pandemic levels yet, the expectation is to achieve revenue results this year that are close to what they were in 2019. EPR Properties collected 97% of rent in the fourth quarter of 2021, a positive sign for the trust.
As a result of the Covid-19 impact on the business, EPR Properties suspended its dividend from June 2020 to July 2021. The trust reinstated its dividend in August of last year, but at a 35% reduction compared to the last distribution. EPR Properties recently raised its dividend 10% for the April 18, 2022, payment date.
A dividend suspension and reduction could turn off some investors, but it took a pandemic to end the EPR Properties’ 10-year dividend growth streak. Shareholders should see $3.23 of dividends per share this year, equating to a projected funds-from-operation payout ratio of 73%. EPR Properties often has a payout ratio in the low 80% range. Shares yield 4.4% today.
EPR Properties’ dividend is not yet back above its pre-pandemic levels, but the trust has seen a sharp recovery in its business. This is expected to continue into the current year as well. Absent another nationwide shutdown of the economy, we believe that EPR Properties’ high-yield monthly dividend is very secure.
Main Street Capital (MAIN)
Next up is Main Street Capital, a top business development company, or BDC. The company is valued at nearly $3 billion and generates annual revenue of $289 million.
Main Street Capital provides long-term debt and equity capital solutions to companies in the lower middle market range, which are those that have annual revenue in the $10 million to $150 million range. The company also provides debt capital to middle market companies, which are those that generate revenue of $150 million to $1 billion per year.
With its ability to invest in both debt and equity, Main Street Capital is different than most other companies in the space that use private debt or private equity alone. The lower middle market private debt and equity space is more of a niche environment as it is too small for most commercial banks. At the same time, its too large for smaller retail banks, leaving the company with few major rivals.
In addition, the company operates a geographic diverse business model, with no one region of the U.S. accounting for more than a quarter of invested capital. Most of Main Street Capital’s transactions are through recapitalization and leveraged buyouts, but the company is also diversified by industry group.
Main Street Capital owns two small business investment company funds that provide clients with access to low cost, fixed rate loans. The company operates its own investment funds, which helps to keep management fees low, giving it an advantage over peer groups.
Main Street Capital’s revenue fell 8.5% in 2020 as the company’s business wasn’t immune to the impact of the pandemic. Revenue surged nearly 30% last year as Main Street Capital has already surpassed its 2019 revenue totals, demonstrating the resilient nature of the company’s business model.
The company’s resiliency also benefited its shareholders as Main Street Capital raised its dividend twice during 2020 as well as distributed a special dividend at the end of the year. The dividend has been increased for six consecutive years. The company has never decreased its monthly dividend payments, an excellent characteristic for investors seeking income.
With expected dividends of $2.58 per share for the year, we project Main Street Capital a payout ratio of 94%. This is a high payout ratio, but below the stock’s 10-year average payout ratio of 113%. Shares yield 6.2%.
Monthly Dividend Stocks: Realty Income (O)
Our final company for high-yield monthly dividend stocks is Realty Income, one of the more well-known REITs in the market. The $43 billion company has annual revenue of nearly $2 billion.
Realty Income was founded in the late 1960s, but didn’t have its public listing until 1994. In that time, the trust has transformed into one of the largest REITs in the country. Today, Realty Income has more than 11,000 total properties across 60 different industries.
The company also has operations in every U.S. state as well as Europe. This provides broad diversification across tenants and geographic regions. No industry group contributes more than 10% of annual rents, which will likely help Realty Income during the next recession.
This diverse business model helped Realty Income withstand the worst of Covid-19 as revenue grew 10.5% in 2020 and the occupancy rates stayed in the mid-to-high 90% range. The most recent quarter saw an occupancy rate of 98.5%. Importantly, Realty Income collected most of rent due, including 100% from movie theater clients.
The trust has made strategic business decisions to improve its core business even further. Realty Income merged with VEREIT, a leading manager of more than 3,8000 single-tenant properties, on Nov. 1, 2021. Following this, the trust spun off its office property business into Orion Office REIT (NYSE:ONL), divesting one of the weaker areas of business for Realty Income during the 2020 period. The trust also has expanded its European footprint and now owns properties in both the U.K. and Spain.
A strong business model has enabled Realty Income to grow its dividend for 26 consecutive years, qualifying the trust as a Dividend Aristocrat. The trust is one of just two REITs that is a member of this exclusive index. Realty Income raised its dividend four times in 2020 as the trust performed very well during the pandemic.
Realty Income should distribute at least $2.96 of dividends per share this year, resulting in a projected payout ratio of 75%. This compares well to the average payout ratio of 84% since 2012 and would be the lowest payout ratio during this period. Realty Income yields 4.1%.
For investors requiring monthly dividend payments, there are limited options. Fortunately, there are several high-quality companies that offer high yields.
EPR Properties, Main Street Capital and Realty Income are three examples of monthly dividend stocks we feel investors should consider. Each stock yields at least three times the average yield of the S&P 500 Index. EPR Properties did struggle in 2020 as a result of the Covid-19 impact, but it has since reinstated and raised its dividend. Main Street Capital and Realty Income both raised their distributions several times in 2020 and, especially in the latter’s case, escaped the pandemic must better than peers.
Each name also has a reasonable payout ratio relative to its respective historical average, which should provide confidence to investors that the dividend is safe for each company.
On the date of publication, Bob Ciura did not have (either directly or indirectly) positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.