3 High Yield Monthly Dividend Stocks to Buy Now
By: Ned Piplovic,
While quarterly distributions meet most investor income needs, some investors need more frequent distributions to cover their ongoing expenses and high-yield monthly dividend stocks fit their requirements.
In addition to the benefit of receiving more frequent payments and a more consistent cash inflow, monthly dividends can offer investors additional advantages over the quarterly distributions. For investors who use these payouts to cover their ongoing expenses the monthly distribution frequency aligns well with the monthly cash needs.
Even for high-yield monthly dividend stocks, monthly dividend distributions can make the portfolio grow faster because of the higher-frequency compounding effect. Investors who are not looking to use the monthly distribution to cover monthly expenses can reinvest the monthly income payouts right away, instead of receiving dividend distributions only four times per year.
Obviously, seasoned investors could attempt to generate a portfolio that generates monthly dividend income by selecting equities with quarterly dividend distributions that have staggered dividend pay dates. However, that strategy is difficult to execute successfully and might limit the options for some months. Less-than-optimal portfolio strategy most likely would reduce total returns. While most companies decide their dividend payouts in line with their quarterly results, the availability of quarterly dividends with the January, April, July and October payout schedule will be significantly bigger than stocks with a February, May, August and November payout schedule.
Furthermore, with different stock providing the income for different months, the monthly income level would most likely fluctuate and might not meet the monthly expenses. Even with this approach, the monthly income payments still would vary. Obviously, the monthly dividend income can be regulated by buying different amounts of shares based on the dividend per share payout to even out the distributions. However, finding few high-yield monthly dividend stocks is much simpler and significantly easier to manage.
Securities that pay monthly dividends are easy to find. Most investment advisory sites and brokerages have a section that offers a separate list of equities that pay monthly dividends. Within these tools, investors can sort and filter the equities based on their investment portfolio goals and personal preferences.
Some monthly dividend equities have higher dividend yields or longer records of dividend payouts than the equities mentioned in this article. However, the three equities listed below were selected to meet specific criteria. All three high yield monthly dividend stocks below have a dividend yield in excess of 10%. Additionally, the equities below delivered a 12-month total return that exceeds their current dividend yield, which indicated that the stock also delivered asset appreciation and eliminates equities with capital losses higher than dividend yields. Additionally, to ensure that the total return is not a short-term fluke, all three equities here have three-year total returns that exceed the 12-month-returns by at least 5%.
3 High Yield Monthly Dividend Stocks to Buy Now: #3
Stellus Capital Investment Corporation (NYSE:SCM)
Formed as a spin-off from the D. E. Shaw & Company in 2012, the Stellus Capital Investment Corporation is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company. The firm invests primarily in private middle-market companies — typically those with $5 million to $50 million of EBITDA (earnings before interest, taxes, depreciation and amortization) — through various types of debt financing, often with a corresponding equity investment. Stellus Capital Management serves as SCM’s investment adviser and manages its investment activities. The firm has more than $1.6 billion in assets spread across 20 industries.
The company’s current $1.133 monthly dividend payout corresponds to a $3.60 annual dividend payout and a 10.4% forward dividend yield. The firm has been paying the same monthly amount since beginning payouts in 2012. With the flat dividend payout amount, the rising share price pushed the current dividend yield slightly below the company’s own 11.2% five-year average
Like many other monthly dividend stocks, the Stellus Capital Investment Corporation distributes income payouts in the middle of the month. The next ex-dividend date should occur around October 30, 2019. The company will distribute the next round of dividend distributions in mid-November to all shareholders of record prior to the late-October ex-dividend date.
Combined with asset appreciation, the dividend income delivered a total return of 13.7% over the trailing 12 months. The three-year total return exceeded 50% and the five-year total return is nearly 60%.
3 High Yield Monthly Dividend Stocks to Buy Now: #2
Virtus Global Dividend & Income Fund, Inc. (NYSE:ZTR)
Formed by Virtus Investment Partners, Inc. in 1988, Virtus Global Dividend & Income Fund, Inc. is a closed-ended balanced mutual fund. Virtus Investment Advisers, Inc., Kayne Anderson Rudnick Investment Management LLC and Newfleet Asset Management, LLC serve as the fund’s advisers. The fund invests its assets in the public equity and fixed income markets of the United States. Actively managed, the fund’s portfolio of holdings targets to deliver performance benchmarked against a composite index comprised of 60% Russell Developed Large Cap Index and 40% Bloomberg Barclays U.S. Aggregate Bond Index.
Like the Stellus Capital Investment Corporation above, the Virtus Global Dividend & Income Fund pays a $0.1133 monthly dividend distribution. The $3.60 annualized payout amount corresponds to a 12.25% forward dividend yield. However, unlike Stellus, Virtus’ current yield is 4.7% higher than the company’s own 11.7% average yield over the last five years.
In addition to beating its own five-year average, Virtus’s current yield also outperformed the 3.81% simple average yield of the entire Financial sector by more than 220%. Additionally, as the highest yield among nearly 200 top stocks in the Closed End Fund Debt industry sector, Virtus’ current yield is nearly triple the sectors simple average and 64% higher than the 7.47% average of the sectors only dividend-paying equities.
The fund’s asset appreciation added nearly an equal amount of gains to combine with the high dividend yield for a total return of more than 22% over the trailing 12 months. The total return over the past three years is nearly 34% and the five-year total return approaches 40%.
3 High Yield Monthly Dividend Stocks to Buy Now: #1
ETRACS Monthly Pay 2xLeveraged Wells Fargo MLP Ex-Energy ETN (NYSE:LMLP)
The Wells Fargo Master Limited Partnership Ex-Energy Index is intended to mirror the performance of all non-energy master limited partnerships listed on the New York Stock Exchange, NYSE or NASDAQ that satisfy all other market capitalization and eligibility requirements. The Index is a modified market capitalization-weighted index that includes non-energy MLPs with market capitalization of at least $100 million at the time of inclusion. As of October 15, 2019, the fund comprised just 12 individual holdings, with share of assets ranging from 10.33% for Westlake Chemical Partners LP (NYSE:WLK) to just 3.63% for Navios Maritime Partners LP (NYSE:NMM).
The Index’s dividend payout amounts depend on the performance of the underlying holdings, which vary from one month to another. The current payout of $0.073 will be distributed on October 21, 2019. However, the September payout was significantly higher at $0.396. Based on how the payouts are tracking year to date versus the same period last year, the Index is expected to pay an annual dividend of $2.14 for the full-year 2019, which corresponds to a 12.67% forward dividend yield.
A share price pullback of nearly 70% in 2015 limited the total return to less than 50% over the past five years. However, a share price recovery since the 2015 price drop delivered extraordinary total returns of more than 25% just over the past 12 months. Additionally, LMLP’s stakeholders more than doubled their investment with a total return of nearly 130% over the last three years.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.