Generally speaking, investing in blue-chip stocks that pay monthly dividends has several advantages. The most obvious advantage, and one that’s particularly attractive currently, is income. Dividends are periodic payments that owners either reinvest or use as income. For many, that second option makes particular sense now as the economy weakens. Further, dividends are predictable.
Companies pay quarterly or monthly and investors therefore have a reliable and predictable asset. Those dividends also buffer the volatility of downward trending markets. A portfolio with a significant portion of dividend bearing stocks simply doesn’t fall as much as one with fewer dividends in difficult markets. Again, that’s especially enticing with recession predictions increasing. That said, high-yield dividends, especially those paid monthly, can be traps and are at risk of ceasing payments in unpredictable fashion. Nevertheless, here are a few monthly dividend stocks to consider.
|ORC||Orchid Island Capital||$11.06|
|PECO||Phillips Edison & Co.||$31.41|
|APLE||Apple Hospitality REIT||$15.67|
Income Realty (O)
Income Realty (NYSE:O) is a company that very clearly wants to be known as a stock paying a monthly dividend. In fact, the company has registered a trademark for the phrase “The Monthly Dividend Company,” which it uses in many of its communications.
It’s also among the more dependable firms on this list based on a few factors. For one, the company hasn’t reduced its dividend since 1999. That’s impressive for a company that operates within an industrial real estate sector that routinely fluctuates over long periods of time.
The company has also weathered long business cycles since 1999 and continued to increase its monthly payments. Those results are the product of a conservative capital structure that relies on leasing to firms with credit ratings between A3 to A-. O stock has essentially been flat throughout 2023 but pays 4.89% through its dividend. Further, it’s very well diversified with more than 12,000 properties leased across 84 countries.
Orchid Island Capital (ORC)
Readers will inherently understand the risk in Orchid Island Capital (NYSE:ORC) stock once they understand that it invests in leveraged residential mortgage-backed securities. Without digging any further, headlines alone and the great financial crisis could spook anyone away from Orchid Island Capital. The risk is clear and any investors should consider it.
But the potential returns are also very evident. ORC shares have more than 50% upside based on average target stock prices. That said, both analysts covering the firm rate it a hold, strongly indicating that it’s currently difficult to predict much of anything, even more so than usual.
Anyway, it’s the dividend that matters here. And it’s one with a high yield, currently above 17%. A 17% yield alone is highly indicative of risk. That’s a yield that suggests investors should not depend on the payment very much. Such high payment percentages vanish sometimes and decrease more often. Orchid Island is a great example: It decreased its dividend twice in 2022, the last time in August to $0.16, where it currently stands.
Phillips Edison & Co. (PECO)
Phillips Edison & Co. (NASDAQ:PECO) is another REIT stock that operates primarily in the shopping center space. The pace of consumer spending is slowing from recent months. That is a clear risk to the company and shareholders. Yet PECO shares are less risky than others on this list, and certainly less so than ORC immediately above.
Phillips Edison & Co. shares have ranged in price between $30 to $34 and are up since their 2021 IPO at $27. That price history is encouraging if somewhat short. The company has been paying a dividend since 2018, before it went public. The company basically halved the payment from $0.167 to $0.085 in 2020. It now stands at $0.093 and is paid at a rate of 3.49% that is considered healthy by conventional standards.
It seems to be a safe company based on the notion that revenues and net income increased in both Q4 and 2022 overall.
Gladstone Land Corp. (LAND)
Companies that invest in farmland real estate like Gladstone Land Corp. (NASDAQ:LAND) have garnered a lot of attention of late from investors. There’s a general feeling that residential real estate doesn’t offer the same strong advantages it once did and that has turned the focus elsewhere. Farmland is a prime example as many people expect it to continue to rise in value due to its clear utility. That was indeed the case in 2022, as it increased by 12.4% per acre in value.
The company leases the farmland it owns and the facilities on those properties to farmers. Gladstone Land owned 169 farms as of the end of 2022, up from 164 a year earlier. It isn’t an upstart firm either, having been established in 1997. In other words, it isn’t a firm trying to take advantage of a trend.
Instead, it mostly seeks income for itself in the form of steady revenue from the farmers it leases to and rising net income. And both revenues and net income increased in 2022 YoY. In short, LAND stock provides monthly income and a steady, dependable business model.
PermRock Royalty Trust (PRT)
PermRock Royalty Trust (NYSE:PRT), as you likely guessed by its name, operates as a royalty income trust in the energy business. Royalty income trusts trade like stocks and generate income for investors based on the performance of their underlying assets. That means, the more oil the company can pump and at higher prices, the better.
OPEC’s recent decision to cut production favors PermRock. The announcement immediately led to prices rising. PermRock’s production occurs solely within the Permian basin in Texas. Supply side factors are favorable to the company. Those higher prices suggest the company’s royalty could soon rise. The increase will be even greater if the company pumps more oil though the evidence for that is less clear.
Apple Hospitality REIT (APLE)
Apple Hospitality REIT (NYSE:APLE), in addition to its monthly dividend, has a lot of positive factors on its side. The company operates a diverse portfolio of higher-end hotel properties under well-known brand names including Marriott. Its portfolio of properties spans more than 90 markets and is therefore arguably diversified. Further, pent-up travel demand continues to benefit the company.
APLE stock performed better than the overall market in 2022 but hasn’t moved upward since. But the attraction here is its relatively high-yield 6.25% dividend. Its higher-income customer base theoretically means it’s better protected overall. If the rich get richer in downturns as the poor get poorer, APLE stock is one to own.
Company guidance suggests the company will see net income increase by 13.95% in 2023, to $165 million. The upper end of guidance of $209 million would result in a 44.3% increase. Monthly income and strong upside are the clear selling points here.
Gladstone Capital (GLAD)
Investors remain skittish about financial stocks like Gladstone Capital (NASDAQ:GLAD), and rightly so. The economy seems to be worsening and the banking system’s recent problems only worsen overall trust. Just speaking generally, investors would normally hesitate when considering Gladstone Capital in this current environment. The fact that the company finances lower middle market companies makes it that much more risky.
Of course, risk is balanced by reward. In this case the result is a dividend yielding nearly 10% paid on a monthly basis.
In any case, Gladstone Capital is actually doing quite well based on its latest earnings report for the year ended Dec. 31, 2022. Investment income increased by 21% and net income was up 16.7%. The company’s yield on interest bearing investments reached 12.3%, representing a 9.8% jump on a sequential basis. So, while Gladstone Capital does serve lower middle market firms and does have some subordinated debt, it is doing well on a fundamental basis.
On the date of publication, Alex Sirois 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.