Instead of bonds, try these income stocks.
The Federal Reserve recently raised interest rates for the first time since 2018. While rising rates are good news for income investors, the Fed’s planned incremental 0.25% hikes mean interest rates will likely remain historically low for at least several more quarters. In the meantime, income investors waiting for higher rates on bonds and savings can invest in high-yielding dividend stocks as a source of regular income. Most high-yield stocks pay quarterly dividends or distributions, but these monthly dividend stocks have at least 5% yields and make payments about once every four weeks.
Pembina Pipeline Corp. (ticker: PBA)
Pembina Pipeline is an oil and gas infrastructure and pipeline company that operates mainly in Western Canada. So far in 2022, Pembina has provided investors with a powerful one-two punch of a soaring stock price and a regular monthly dividend of about 16.5 cents. Pembina shares are up more than 23.8% year to date as of March 24, thanks to soaring oil and gas prices. The ongoing conflict between Russia and Ukraine suggests that energy prices will likely remain elevated for the foreseeable future. Pembina has guided for $655 million in capital expenditure in 2022 to expand its pipeline network, and it plans to spend up to $200 million of any excess cash on share buybacks.
Dividend yield: 5.3%.
AGNC Investment Corp. (AGNC)
AGNC Investment is a mortgage real estate investment trust, or REIT, which is a type of corporation that receives certain tax benefits and is required to distribute 90% of taxable income to investors. This mandate guarantees a relatively consistent dividend, which is reflected in AGNC’s regular 12-cent monthly payout. As a mortgage REIT, AGNC doesn’t invest in residential real estate directly. Instead, it buys mortgage-related securities, which are largely federal loans backed by government-sponsored enterprises, including Fannie Mae and Freddie Mac. Federal backing reduces the risk associated with these assets, giving income investors peace of mind.
Dividend yield: 11%.
Prospect Capital Corp. (PSEC)
Prospect Capital is a business development company, or BDC. Prospect provides capital to middle-market companies and private equity financial sponsors for refinancing, leveraged buyouts, acquisitions and other purposes. Since its 2004 initial public offering, Prospect has made more than 375 investments totaling more than $18.1 billion. Its current portfolio consists of 127 companies in 39 industries, providing investors with deep diversification. Like REITs, BDCs pay out at least 90% of their taxable profits as distributions to investors to maintain a lower corporate tax rate. Prospect pays a consistent monthly distribution of 6 cents per share.
Dividend yield: 8.8%.
Main Street Capital Corp. (MAIN)
Main Street Capital is another leading public BDC with a diversified portfolio, a proven track record and a lofty monthly distribution. Main Street has 184 investments, manages $5.7 billion in capital and has a healthy balance sheet. This BDC focuses largely on debt investments in lower middle market companies that have annual revenue of between $10 million and $150 million. At its October 2007 IPO, MAIN shares were trading at $15. In the roughly 15 years since, Main Street has paid out more than $33 per share in distributions.
Dividend yield: 6.2%.
LTC Properties Inc. (LTC)
LTC Properties is a REIT that owns and operates senior housing and health care properties. Senior housing facilities were hit particularly hard during the pandemic, and LTC shares are still down about 17% since the beginning of 2020. Despite the challenges, LTC maintained its 19-cent monthly dividend payment throughout the worst of the pandemic. As a result, LTC’s funds-available-for-distribution-payout ratio climbed to an uncomfortable 100% in the third quarter of 2021. That ratio dropped to 93% in the fourth quarter, however, a sign that business is now trending back in the right direction.
Dividend yield: 6.2%.
Broadmark Realty Capital Inc. (BRMK)
Broadmark Realty Capital is a REIT that provides financial services for real estate investors and developers. The company offers short-term, first-deed-of-trust loans backed by real estate to fund the acquisition, renovation or development of residential or commercial real estate. Since its inception in 2010, Broadmark has funded more than 1,200 real estate loans worth an aggregate of $2.8 billion. The company has a $1.5 billion active, diversified loan portfolio with exposure to properties in 19 U.S. states and Washington, D.C. Broadmark reported $947 million in 2021 loan production, up 51.2% compared with 2020, resulting in 19.5% portfolio growth.
Dividend yield: 9.9%.
Ellington Financial Inc. (EFC)
Ellington Financial is a mortgage REIT that invests in residential loans, commercial mortgages and commercial loans. About two-thirds of its portfolio consists of residential mortgages. The company says it focuses on underserved, niche market segments, where it believes it has identified market inefficiencies that provide investment opportunities. Ellington switched to a monthly dividend payment in 2019, but it was forced to cut that payment by about 50% during the pandemic in 2020. Ellington has since been steadily building its dividend back up to its current level of 15 cents per share, and the REIT has generated a year-to-date total return of 6.1% as of March 24.
Dividend yield: 10.1%.
EPR Properties (EPR)
EPR Properties is a specialty triple-net REIT focused on long-term leases on experiential real estate properties. Theaters make up 45% of EPR’s contractual revenue, and popular meme stock AMC Entertainment Holdings Inc. (AMC) is its largest tenant. Its other major sources of revenue include eat-and-play establishments, ski resorts and other attractions. If AMC can continue to ride the flood of retail investor funding spearheaded by Reddit’s WallStreetBets community and overcome the challenges of the movie theater business that had it teetering on the brink of bankruptcy in early 2020, EPR will be a major beneficiary. The REIT recently announced an increase to its monthly dividend payment and will begin paying 27.5 cents per share from April 18.
Dividend yield: 6.3%.
8 monthly dividend stocks with high yields:
— Pembina Pipeline Corp. (PBA)
— AGNC Investment Corp. (AGNC)
— Prospect Capital Corp. (PSEC)
— Main Street Capital Corp. (MAIN)
— LTC Properties Inc. (LTC)
— Broadmark Realty Capital Inc. (BRMK)
— Ellington Financial Inc. (EFC)
— EPR Properties (EPR)
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Update 03/25/22: This story was published at an earlier date and has been updated with new information.