Many investors prefer their dividend stocks to pay distributions monthly rather than quarterly. These seven stocks are a sure way to secure that monthly paycheck.
Feb. 29, 2024, at 3:46 p.m.
Monthly dividends can be reliable source of income and act as a safeguard against inflation.
Stock market investors appreciate dividends. Dividends provide cash flow and enhance total returns. They allow investors to participate directly in the revenue and earnings of the companies in their portfolios. By providing regular income, dividends can also act as a hedge against inflation. Not all stocks pay regular dividends, but those that do are often considered stable and financially secure.
A company’s board of directors makes its dividend decisions. It decides the amount of a dividend and the dividend distribution schedule. Once a company declares a regular dividend, it prefers to continue paying it indefinitely. This is because investors look at the suspension of a dividend in a very negative light. It’s taken as a sign of financial trouble and can adversely affect the stock price.
Most stocks that pay regular dividends distribute them quarterly. Some will pay annually or semiannually. A small number of dividend stocks pay monthly, though. Monthly dividends can be a big benefit to income-oriented investors, especially those who are in retirement or relying on dividends as an important source of income.
Here are seven of the best monthly dividend stocks to own:
STOCK MARKET CAPITALIZATION 12-MONTH TRAILING DIVIDEND YIELD
Agree Realty Corp. (ticker: ADC) $5.6 billion 5.3%
Ellington Financial Inc. (EFC) $905 million 16.5%
Gladstone Investment Corp. (GAIN) $500 million 6.9%
Modiv Industrial Inc. (MDV) $112 million 7.7%
LTC Properties Inc. (LTC) $1.3 billion 7.2%
Realty Income Corp. (O) $44 billion 6.4%
PermRock Royalty Trust (PRT) $53 million 10.3%
Agree Realty Corp. (ADC)
The incredible growth of online shopping has made brick-and-mortar retail real estate a very challenging industry over the last few decades. ADC is a real estate investment trust, or REIT, that is taking that challenge head on. The company is proud of their innovative approach and unique financing methods.
ADC is a retail REIT that leases space to creditworthy tenants on a long-term, net-lease basis. This means that the tenant, not the landlord, is responsible for a building’s upkeep, taxes and insurance.
ADC owns and operates over 2,100 properties in 49 states. It currently controls over 44 million square feet of rentable space. ADC management has been able to deliver a compound average total return of 11.8% since it went public in 1994.
Market cap: $5.6 billion
12-month yield: 5.3%
Ellington Financial Inc. (EFC)
EFC is a mortgage REIT, or mREIT, that is based in Old Greenwich, Connecticut. The company is unique in the fact that it has two distinct but related business lines.
Its investment portfolio division buys and manages an income-producing portfolio of mortgage bonds that are backed by one or more U.S. government housing agencies. EFC also complements its mortgage portfolio by holding some corporate and consumer debt as well. Its Longbridge Financial segment originates and services reverse mortgages that market to older Americans.
Wall Street analysts are estimating that the company will generate $190 million in revenue in fiscal 2024. As a REIT, EFC must distribute at least 90% of its taxable income as dividends.Market cap: $905 million
12-month yield: 16.5%
Gladstone Investment Corp. (GAIN)
Gladstone is a specialty investment firm incorporated as a business development company, or BDC. It generates its revenue and earnings by making senior loans available to mature, lower-mid-market private and public companies. It also finances mergers and buyouts and will refinance a company’s existing debt on favorable terms.
Unlike some BDCs, Gladstone avoids investing in startups or immature companies. Instead, it looks to invest in small and midsize firms in the manufacturing, consumer and consumer-services sectors that generate between $10 million and $20 million in revenue.
Gladstone makes individual loans of between $5 million and $30 million. When making equity investments, it is willing to invest up to $40 million but will seek at least one seat on the company’s board of directors.
Market cap: $500 million
12-month yield: 6.9%
Modiv Industrial Inc. (MDV)
Modiv is proud of the fact that it is in an internally managed REIT. This means that, in addition to its own business operations, it manages all of its investment properties in-house. It does not outsource landlord functions, allowing it to exercise a high degree of quality control.
The company concentrates on single-tenant buildings in the retail, office and industrial sectors of the commercial real estate industry. To a lesser extent, it invests in manufacturing facilities as well.
Modiv controls more than 4.5 million square feet of rentable, commercial space and owns industrial properties worth over $600 million. Its annual dividend, which it distributes monthly, stands at $1.15.
Modiv will report fiscal 2023 earnings on March 4.
Market cap: $112 million
12-month yield: 7.7%
LTC Properties Inc. (LTC)
The senior housing and health care sectors of the commercial real estate industry have become especially lucrative as our population has aged and the baby boomer generation continues to retire. LTC is a REIT that operates in this very profitable field.
LTC uses a sale-and-lease-back strategy in purchasing and renting space. This means that it buys health care facilities from the company that owns them and then proceeds to lease them back to the original owners on a long-term basis. In this way the property owner gets an infusion of cash and LTC gets rental income on an ongoing basis. Roughly half of its properties are senior housing, while the other half are skilled-nursing and long-term-care facilities.
LTC is a hybrid REIT. What this means to investors is that it not only owns real property, but it also invests in financial assets, such as commercial real estate mortgages or mortgage bonds.
Market cap: $1.3 billion
12-month yield: 7.2%
Realty Income Corp. (O)
There is little question that O belongs on any list of monthly dividend-paying stocks to buy. This REIT owns more than 15,000 commercial properties in prime locations around the country. Its creditworthy tenant base is made up of well-known convenience stores, drugstores and big-box retail outlets.
Income investors will be happy to know that O is an established member of the dividend aristocrats. Only companies who have increased their dividends for at least 25 consecutive years earn a spot on that exclusive list. As of February 2024, the company has paid 644 consecutive dividends.
The company has been a reliable dividend payer throughout its 55-year history and remains committed to delivering dependable monthly income to its shareholders.
Market cap: $44 billion
12-month yield: 6.4%
PermRock Royalty Trust (PRT)
The Permian Basin is one of the largest and most productive oil and natural gas regions in North America. PRT is a publicly traded trust that owns valuable royalty rights that entitle it to 80% of the profits generated by properties owned by Boaz Energy II LLC that are located in that energy-rich region.
Virtually all of the 22,997 net acres of the underlying properties are located in West Texas, with the bulk of them being on the Eastern Shelf of the Permian Basin in Glasscock, Schleicher, Stonewall and Coke counties. PRT’s share of Boaz’s profits in 2023 is estimated to be $22 million.
Because the royalties PRT earns are based on the profit of the underlying company, the trust’s income distributions are highly sensitive to energy prices. For example, the historic dividend paid by PRT on June 29, 2022, was 10 cents per share. Crude oil on that day traded above $114 a barrel. On Feb. 28, 2024, PRT paid a dividend of 3 cents per share, while a barrel of oil sold for about $79.
Energy prices are cyclical in nature. If oil and natural gas continue their uptrend that began in December of last year, PRT shareholders should see a rising dividend.
Market cap: $53 million
12-month yield: 10.3%
