Losing money during a short-term selloff for the stock market, like the one we’re currently experiencing, is unpleasant.
But running out of money in retirement is simply terrifying.
That may sound like stating the obvious. After all, running out of money at any time isn’t particularly fun. However, the problem with running out of money in retirement is that you no longer have the potential of taking on additional work or cutting back on things. While some retirees can afford to spend lavishly, most are simply concerned with buying food and paying property taxes and going to the doctor.
None of those are discretionary expenses, and cutting back on any of them is incredibly painful — if not life-threatening.
But sadly, running out of money in retirement is all too common in 2018. Chronically low rates are holding back yields on interest-bearing assets like bonds and CDs. And while plenty of stocks pay dividends, the yield of the S&P 500 at this writing is a sickly 1.94%.
As a result, even some who have built modest savings are struggling to produce the necessary income for day-to-day expenses.
If this sounds familiar to you, then let me help with this lineup of low-risk monthly dividend investments.
Going monthly with your income strategy is a big change. After all, life is built around the idea of the monthly billing cycles — from mortgages to car payments to utility bills — and simply knowing what your budget looks like for 30 days instead of 90 days is a big change.
Also, a monthly payout tells you that management is making a real effort to give its investors what they want — and that the investment has the consistent cash flow to back up more consistent distributions.
When you take all that and layer in rigorous fundamental analysis of each pick to help you find low-risk investments with big-time yield, it’s easy to see why this approach is a powerful path to retirement security.
If you have any questions or concerns about these stocks, please contact me via email any time at editor@investorplace.com.
Stock #1 -Realty Income (O)
- Current Dividend Yield: 3.8%
Realty Income (NYSE:O) likely is the best-known, and certainly is the largest, of the monthly dividend payers. It has even registered the trademark for its slogan, “The Monthly Dividend Company.”
The case for O stock goes beyond its monthly payouts. Realty Income has been a star performer for the last decade, seeing its share price rise 160%-plus since 2008 even without dividends compared with a 10-year return of roughly 90% for the broader S&P 500 index.
Admittedly, it may be tough for O stock to replicate that performance going forward as the market gets a bit choppier in 2018. There were already concerns that the company was getting a bit overbought as it became a fashionable trade over recent years, and some of those fears remain.
But there’s still reason for optimism, particularly for new investors, now that O stock has corrected 12% after its declines in early October. Further, Realty Income recently announced Sumit Roy as Realty Income’s new CEO, succeeding John P. Case. Previously, Roy served as an investment banker, where he handled $57 billion in real estate capital markets. He became Senior Vice President of Real Estate Acquisitions at Realty in 2011, working his way up to Executive Vice President of Acquisitions to Chief Investment Officer and Chief Operating Office. Roy knows Realty Income through and through, helping build the company to what it is today.
Realty Income has a nicely diversified portfolio of tenants, including near-12% of revenue comes just from Walgreens Boots Alliance (NASDAQ:WBA) and 7-Eleven — two world-class corporations that are going nowhere.
This safe REIT with a juicy yield has a lot to offer. The fact that you get paid monthly is just a bonus.
Stock #2 – US High Dividend Low Volatility ETN (HDLV)
- Current Dividend Yield: 10.3%
OK, so this isn’t technically a stock — it’s a fund. But this pick can just as easily be purchased in a brokerage account or IRA, and is a powerful path to monthly income, so it has to be included.
The ETRACS Monthly Pay 2xLeveraged US High Dividend Low Volatility ETN (NYSEARCA:HDLV) adds a little spice to a monthly payment portfolio because it is a “leveraged” fund that uses financial engineering to theoretically DOUBLE the yield of its components. It’s not a conventional strategy and not without its risks, but the benefits are clear, with a current yield above 11% before taxes and expenses.
For investors willing to take on those risks, there are some interesting potential rewards. HDLV focuses on high-yielders that are some of the biggest names on Wall Street — Verizon (NYSE:VZ), AT&T (NYSE:T) and Duke Energy Corp (NYSE:DUK). Sure, all of those have some challenges, but they aren’t going anywhere anytime soon. And the fact that this fund owns several of these names means you’re getting built-in diversification instead of putting all your eggs in one basket.
And if you want growth, in all honesty, you shouldn’t be looking at dividend payers at all — instead, you should be chasing up-and-coming tech stocks.
If you want big, monthly dividends, however, there isn’t really a better option out there.
Stock #3 – LTC Properties (LTC)
- Current Dividend Yield: 5%
LTC Properties (NYSE:LTC) has begun to correct course after the market’s rough patch at the beginning of 2018 and again in October. And there’s reason to believe that its long-term performance and juicy dividend will carry this company to success long-term, and new money may still find a great deal right now in this cheap real estate investment trust.
LTC owns senior housing and healthcare properties, with the business basically split 50/50 between assisted living communities and skilled nursing centers. With the “Baby Boom” generation still heading into retirement — and living longer — demand for those types of services should only grow.
LTC hasn’t been as aggressive in raising its dividend as other REITs, with its payout of 19 cents unchanged since a one-penny increase back in 2016. But a fantastic yield of nearly 5% at present and a sustainable payout ratio make the income potential very impressive.
The monthly dividend here is a nice touch; what’s more important is that LTC looks like a safe, stable income play given its long-term play on healthcare and the aging demographics of the U.S.
Stock #4 – Main Street Capital (MAIN)
- Current Dividend Yield: 6.1%
Main Street Capital Corporation (NYSE:MAIN) is a great income investment with a 6% dividend yield, paid monthly. And as a mid-sized investment firm, MAIN carries a diversified portfolio of debt and small private equity that is protected against any individual risks to specific companies but in a great position to play the rising tide of the American economy.
And for the most part, that’s true. Main Street has an excellent track record, and investments ranging from software companies to an Arizona pizza chain to a number of manufacturers. Investment income is growing nicely, and Main Street supplements its monthly distributions with semi-annual payments.
The one concern here might be that MAIN stock now trades at a modest premium to net asset value, and might not be a great play if the economy does turn down. But the “reflation” trade across 2017 and into 2018 hasn’t quit despite the naysayers, and a lower corporate tax rate and strong consumer metrics bode very well for this pick going forward.
Bigger picture, cyclical investments like this have done well as the U.S. economy has kicked into high gear. That means both the asset value and the dividends seem likely to rise going forward, with Main Street remaining one of the most successful business development corporations out there.
Stock #5 – Shaw Communications (SJR)
- Current Dividend Yield: 4.4%
Shaw Communications (NYSE:SJR) is Canada’s fourth-largest telecommunications provider. That may not sound like a great endorsement, but with a dividend yield of nearly 5% and monthly payouts you can rely on it is just the kind of sleepy but reliable play you should look for if income is your prime consideration.
Shaw offers an interesting opportunity at current levels, given its admittedly lackluster growth prospects but impressive stability. Down 18% so far this year, SJR stock seems to have bottomed as the market has gotten more volatile. However, its previous acquisition of Wind Mobile (rebranded as Freedom Mobile) has helped give Shaw a diversified offering of wireless, wireline and cable offerings, and the subsequent sale of the ViaWest data center business allowed Shaw to deleverage its balance sheet while focusing more intently on its consumer business.
There’s a chance, too, that aggressive low-priced wireless offerings allow Shaw to steal market share from the big boys the same way T-Mobile (NYSE:PCS) scored points in the battle with Verizon and AT&T. In its most recent quarter, the company reported adds of more than 85,000 new wireless subscribers and 9% growth in ARPU, so there’s a chance to think this growth strategy will slowly but surely pay off in the long-term.
Furthermore, this wireless growth ensures the monthly dividend remains intact and growing.
Stock #6 – Apple Hospitality REIT (APLE)
- Current Dividend Yield: 7.4%
Apple Hospitality REIT (NYSE:APLE) owns 241 hotels in the U.S. operated by two leading companies: Hilton Worldwide Holdings (NYSE:HLT) and Marriott International (NASDAQ:MAR).
The portfolio is well-diversified nationally, with Texas, California and Florida (in order) being the three states where Apple has the largest presence. For the most part, Apple targets urban and suburban markets, giving exposure to business travel, rather than tourism.
APLE went public in 2015, and results so far have been somewhat mixed. Despite volatility up and down between $20 and $16 a share, the stock is just below its IPO price. But remember, real estate investment trusts aren’t exactly designed to deliver massive growth. What they are designed to deliver is safe, reliable income streams — and Apple Hospitality does exactly that.
If we continue to see strong consumer growth in the U.S., there’s a chance this will eventually translate to a lift for the hotel industry. but in the meantime, investors can rely on a juicy dividend around 7.5% and paid monthly to APLE shareholders.
Stock #7 – Pembina (PBA)
- Current Dividend Yield: 4.8%
Before you knock the inclusion of an energy stock, remember that this pick is a pipeline player — not an explorer. That makes it a glorified toll-taker in the sector, and not exposed to the risk of fluctuating crude oil prices.
Pembina Pipeline Corp (NYSE:PBA) operates pipelines in Canada, including moving crude from oil sands plays in western provinces. The “toll taker” nature of the pipeline business gives more stability, and less exposure to energy prices, than O&G wildcatters — though PBA has had a decent amount of volatility over the past three years, and PBA stock is down roughly 6% this year.
The rub is that Pembina pays its dividends in Canadian dollars, which leads to some volatility in distributions. (It also makes ownership in a tax-free account a better choice.) But the yield at the moment nears 5% — and that could rise going forward — so any potential currency risk is only a small consideration here.
Pembina also acquired rival Veresen last year in a deal that will create a mammoth, diversified pipeline and midstream operator. That diversification should give further stability to Pembina’s distributions — and likely Pembina stock.
