With most companies distributing dividends quarterly, investors needing predictable monthly cash flow could desire more frequent payouts.
The good news is that there are a number of securities that pay dividends on a monthly basis, helping to deliver a steady stream of income. This article will discuss three of the best monthly dividend stocks right now.
STAG Industrial (STAG)
STAG Industrial (NYSE:STAG) is an owner and operator of industrial real estate. It is focused on single-tenant industrial properties and has about 563 buildings across 41 states. The focus of this real estate investment trust ( ) on single-tenant properties might create higher risk compared to multi-tenant properties, as the former are either fully occupied or completely vacant. However, STAG Industrial executes a deep quantitative and qualitative analysis on its tenants.
As a result, it has incurred credit losses that have been less than 0.1% of its revenues since its initial public offering (). As per the latest data, 53% of the tenants are publicly rated and 31% of the tenants are rated “investment grade.” The company typically does business with established tenants to reduce risk.
In late April, STAG Industrial reported financial results for the first quarter of fiscal 2023. Core funds from operations (FFO) per share grew 4% over the prior year’s quarter, in line with the analysts’ consensus, thanks to the sustained strength of the REIT’s tenants and material hikes in rent rates. Net operating income grew 8% over the prior year’s quarter but the occupancy rate dipped sequentially from 98.5% to 97.6%. STAG Industrial is facing a headwind due to the pandemic and the ongoing economic slowdown.
However, the REIT has proved fairly resilient so far thanks to the high credit profile of its tenants. The REIT has collected essentially all its rental income in the last eight quarters. STAG Industrial has provided guidance for core FFO per share of $2.22-$2.26 in 2023.
STAG Industrial has a well-laddered lease maturity schedule, with a weighted average lease term of 4.9 years and about half of the leases maturing after the end of 2025. Thus, the cash flows of the REIT can be considered fairly reliable under normal business conditions.
STAG Industrial is one of the few REITs that pay dividends on a monthly (instead of a quarterly) basis — a valuable characteristic for income investors. Income investors should also note that STAG Industrial currently offers a 4.3% yield and has never cut its dividend throughout its short history.
TransAlta Renewables (TRSWF)
TransAlta Renewables (OTCMKTS:TRSWF) is a renewable energy company based in Canada. Its history in renewable power generation goes back more than 100 years. In 2013, the company was spun off from TransAlta (NYSE:TAC), which remains a major shareholder in the alternative power generation company. The company has maintained or increased its dividend (in Canadian currency) every year since 2014.
Its portfolio consists of about 50 facilities powered by wind, natural gas, hydro or solar. It generates the majority of cash flow from its natural gas and wind assets. TransAlta Renewables reported fourth-quarter 2022 results on Feb. 22, 2023. The company generated 4.2% less renewable energy production compared to the year-ago quarter. During Q4, TransAlta Renewables generated 1,264 GWh compared to 1,319 GWh in Q4 2021. Revenue came in higher by 11.6% over the prior year, to C$154 million. Adjusted EBITDA decreased by 5% year-over-year and free cash flow decreased by 24% to C$94 million compared to C$123 million. Cash available for distribution (CAFD) per share was down 35% to 58 cents.
The extended facility outage at the Kent Hills 1 and 2 wind facilities weighed on results. The company suffered a tower collapse at the Kent Hills 2 wind site and determined that all 50 turbine foundations at the Kent Hills 1 and 2 wind sites require a full foundation replacement. However, this is a temporary issue that should be resolved in the second half of 2023.
As the largest wind power generator in Canada, the company may have some competitive advantages. These include experience as a developer and operator of wind facilities in Alberta. With a dividend payout ratio below 70%, the current 8% yield appears secure.
Digital Realty Trust (DLR)
Digital Realty (NYSE:DLR) is a REIT that operates in the technology sector. Its properties include data centers, technology manufacturing sites and more. The company operates over 300 facilities in 28 countries on six continents.
First-quarter 2023 revenue came in at $1.34 billion, up 18% year-over-year. FFO per share of $1.66 was in line with analyst estimates. Reported rental rate increases on renewal leases was 4.5% on a cash basis in the first quarter. The company maintained full-year guidance, expecting FFO per share in a range of $6.65 to $6.75.
Since 2010, Digital Realty increased its FFO per share by an average compound rate of 6.1% per year. We believe the company can achieve a similar growth rate in the future, which will be generated from organic growth as well as acquisitions.
Digital Realty has been very strategic in its acquisitions. For example, in 2017, Digital Realty completed its purchase of DuPont Fabros Technology. This is a REIT that leased properties to some of the largest tech companies in the world. Companies like Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META) are then free to build their own data centers within the properties. More recently, Digital Realty added Interxion, gaining exposure to the European cloud industry.
Digital Realty’s chief competitive advantage is that it is among the largest technology REITs in the world. This gives the REIT a size and scale advantage that competitors have difficulty matching. In addition, the company has proven to be able to utilize its balance sheet to fund acquisitions in order to grow FFO and revenues.
Digital Realty’s dividend payout ratio (using FFO instead of earnings) is comparatively low for a REIT, which should give shareholders confidence that the dividend is relatively safe.
On the date of publication, Bob Ciura did not hold (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.