Monthly dividend stocks are a hidden gem in the market, with only a few dozen out of thousands of publicly traded stocks paying monthly dividends. These stocks tend to have market caps in the hundreds of millions rather than billions, making them perfect for income investors who prefer to receive regular payouts. Compared to quarterly dividends from blue-chip stocks, monthly dividends offer more frequent pay days and potentially higher yields, making them more appealing for retirement planning.
High-yield sectors such as real estate investment trusts (REITs) and business development companies (BDCs) are common among monthly dividend payers, providing investors with consistent and bountiful payouts. However, it is important for investors to thoroughly research these companies to ensure that the high yields are sustainable and not a result of distressed dividends that could be reduced in the future.
One example of a monthly dividend stock is Apple Hospitality REIT (APLE), which has a dividend yield of 6.2%. While APLE has a well-positioned portfolio with high margins and diversified properties, economic headwinds could impact its performance. Another example is Realty Income (O), one of the largest REITs that has been actively expanding its portfolio through acquisitions and expects growth in adjusted funds from operations. AGNC Investment Corp. (AGNC) is a blue-chip mortgage REIT with a high dividend yield of 15.6%, but faces challenges in the current interest rate environment.
Main Street Capital (MAIN) is a top-tier business development company that provides debt and equity capital solutions to lower-middle-market companies. While MAIN has consistently paid monthly dividends with a yield of 6%, its stock is currently trading at a significant premium to its net asset value. PennantPark Floating Rate Capital (PFLT) is another BDC with a dividend yield of 10% that primarily invests in companies supported by private equity sponsors. However, PFLT’s portfolio is 100% floating-rate in nature, making it sensitive to changes in interest rates.
Overall, monthly dividend stocks provide income investors with the opportunity to receive regular payouts and potentially higher yields compared to quarterly dividend stocks. Despite the challenges faced by some companies in the current economic environment, careful research and due diligence can help investors identify quality monthly dividend stocks that offer sustainable income streams. It is important for investors to monitor the performance of these stocks and stay informed about potential risks and opportunities in the market.