3 Monthly Dividend Stocks to Buy Now
By: Ned Piplovic,
While most dividend-paying equities distribute their payouts in quarterly increments, investors seeking more frequent income disbursements should consider taking advantage of monthly dividend stocks.
In addition to more frequent payments and a more consistent cash inflow, monthly dividends have a few additional advantages over their quarterly counterparts. The most significant advantage of monthly dividend distributions is that that the assets grow faster because of the compounding effect.
Instead of waiting a full three months to receive the dividend distribution, monthly dividends allow investors to receive a portion of that income every month and reinvest the money right away. Many investors who reinvest their dividend distributions might be content with receiving their funds quarterly but people who rely on dividend income for living expenses, such as retirees, prefer monthly distributions, since those align with their monthly bills and expenses.
Investors could try to generate monthly dividend income by selecting three different equities that pay staggered quarterly dividends. However, that approach would limit the number of equities that meet the requirements, would lead to a less than optimal portfolio strategy and, most likely, would reduce total returns. Even with this approach, the monthly income payments still would vary.
Additionally, many of the equities that pay monthly dividends are Real Estate Investment Trusts (REITs) and Master Limited Partnerships (MLPs), which take advantage of their favorable tax status and tend to pay higher-than-average dividend yields.
Securities that pay monthly dividends are easy to find. Most investment advisory sites and brokerages have a section that separates equities paying monthly dividends from the other equities.
While some monthly-dividend equities have higher dividend yields or longer records of dividend payouts than the equities mentioned in this article, here are three equities that pay monthly dividends and offer their investors the triple benefit of high yields, multiple years of dividend hikes and asset appreciation.
Realty Income Corporation (NYSE:O)
Headquartered in San Diego, California, and founded in 1969, the Realty Income Corporation is a Real Estate Investment Trust (REIT) that focuses primarily on acquiring, developing and leasing retail and commercial real estate facilities. As of September 2019, the company had more than 5,964 properties under long-term net lease agreements in 49 U.S. states, Puerto Rico and the United Kingdom with more than 100 million square feet of total leasable space.
Since its founding, the company has paid 593 consecutive monthly dividends and increased its dividend 104 times since Realty Income’s public listing in 1994. While Realty Income Corporation pays its dividend distributions monthly, the company generally hikes it dividend payouts quarterly. The Realty Income Corporation has boosted its dividend payout for the past 89 consecutive quarters. Over the past two decades the company enhanced its total annual dividend payout more than 150%. This advancement pace corresponds to an average growth rate of 4.7% per year for two decades.
The REIT’s current $0.228 monthly dividend payout corresponds to a $2.736 annualized distribution. This annualized payout is equivalent to a 3.7% forward dividend yield. The share price grew at a faster pace than the annual dividends distributions over the past few years, which pushed the current yield 11% below the company’s own five-year yield average of 4.17%.
While experiencing some volatility that included a decline of more than 30% in late 2016 and 2017, the share price has maintained a general uptrend since February 2018. Riding that uptrend, the share price passed its 52-week low of $62.28 at the onset of the trailing 12-month period and continued to gain another 31.6% before reaching its $81.94 all-time high at the end of October 2019. Since peaking in late-October 2019, the share price pulled back to close on January 7, 2020, at $74.18, While nearly 10% below its October-2019 peak, the Jan. 7 closing price was still more than 19% above its 52-week low from the beginning of the trailing 12-month period, as well as 41% higher than it was five years ago.
After a pullback of more than 10% in late 2019, the share price has already gained more than 3.4% since mid-December and combined with the rising dividend payouts for a 23% total return over the trailing 12-months. Over the past three and five years, REIT has delivered total returns of 37% and 73% respectively.
STAG Industrial, Inc. (NYSE:STAG)
Founded in 2010 and based in Boston, STAG Industrial, Inc. is a real estate investment trust (REIT) that acquires, owns and operates single-tenant, industrial properties throughout the United States. As of September 30, 2017, the company owned and operated 430 buildings with a total usable commercial area of approximately 86 million square feet across 37 states. More than 80% of the facilities (356) were warehousing and distribution buildings, 66 buildings supported light manufacturing and eight buildings offered flex and office space. Just in 2018, the REIT invested almost $680 million to acquire 53 additional buildings, which added additional 10.3 million square feet to the company’s portfolio.
The current $0.1192 dividend is 0.8% higher than the $0.1183 monthly dividend amount from the same period last year and converts to a current $1.43 annualized payout. The current 4.6% dividend yield is nearly 11% above the financial sector’s 4.11% average yield and also 8.6% higher than the average yield of all the companies in the Industrial REITs segment.
Since its initial dividend distribution in 2011, the REIT has boosted its annual dividend amount every year. Over the past eight years, the company enhanced its total annual dividend payout amount 53%. That advancement pace corresponds to an average dividend growth rate of 5.5% per year.
After losing more than 40% of its value in 2015, the REIT’s share price rose more than doubled over the past four years. The share price entered the trailing 12-month period at its 52-week low of $24.85 on January 7, 2019, and gained 27% before closing at $31.56 in mid-June 2019.
After reversing direction and dropping more than 11% over the subsequent 60 days, the share price resumed its uptrend, recovered all its mid-year losses and reached its new all-time high of $32.62 on January 3, 2020. The share price back marginally to close on January 7, 2020, at $31.43, which was still 26.5% higher than the 52-week low from one year ago.
The company’s dividend income and asset appreciation combined for total returns of almost 36% over the trailing 12-month period. Over the last three years, the REIT delivered total returns of 47%, as well total returns of 56% over the past five years.
EPR Properties (NYSE:EPR)
Headquartered in Kansas City, Missouri, and founded in 1997, EPR Properties is a specialty REIT that invests in commercial properties primarily in the entertainment, recreation and education segments. The company’s current portfolio of nearly $7 billion in assets comprises properties in Entertainment, Recreation and Education. As of 2019, the company owns and leases to more than 250 tenants 416 properties in 43 states and Canada.
EPR’s current $0.375 monthly dividend payout amount is 4.2% higher than the $0.36 distribution from the same period last year. Based on the company’s record over the past decade, investors can expect another similar dividend amount increase for the distribution in February. The current monthly payout corresponds to a $4.50 annualized payout and a 6.4% forward dividend yield. Despite a share price growth — which reduces the yield — EPR’s current yield is 3% above the company’s 6.23% yield average over the last five years.
Furthermore, the current 6.1% forward dividend yield is nearly twice the 3.06% average yield of the overall Financial sector. Compared to the 3.29% average yield of the company’s peers in the Real Estate Development industry segment, EPR’s current yield is nearly 85% higher. Additionally, the company’s current yield is also 27% higher than the 4.75% average yield of the segment’s only dividend-paying companies.
Since resuming annual dividend hikes in 2011, the company has enhanced its annual payout amount 73%, which corresponds to an average growth rate of 6.3% per year. Even with two years of declining annual dividend payouts, EPR still managed to enhance its annual dividend payout amount nearly 160% since 1999. This pace of advancement is still equivalent to an average growth rate of almost 5% per year over the past two decades.
In addition to rising dividend payouts, steady capital gains provided a total one-year return of nearly 12%. The total return over the last three years was nearly 30% and exceeded 70% over the past five 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.