It’s a universal truth on Wall Street that higher risk typically carries higher rewards. But for those who aren’t afraid of owning stocks that are a bit more uncertain than big-name blue chips, there is the potential to unlock a significant income stream that puts the typical large-cap stocks to shame.
For starters, there’s a small group of low-profile companies that pay dividends on a monthly cycle to provide a steadier flow of income. These companies tend to be in very niche businesses that can support a more regular payout cycle, but if you’re at retirement age and want distributions to roll in more frequently, then that is a big plus that offsets some of the business risks.
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Furthermore, a select group of these monthly dividend stocks pay dividends that are simply jaw-dropping — at a rate of 13% or higher, based on their dividend yield.
To be clear, there’s risk not just to the share prices of these businesses right now but also to the payout rate. And given that these double-digit yields are calculated based on 12 months of dividends, a significant disruption in those rates can significantly change the yield going forward.
Still, if you’re not afraid of a bit more risk in pursuit of big and reliable paydays, these seven monthly dividend stocks could be worth a look:
|AGNC Investment Corp. (ticker: AGNC)||14.5%|
|Armour Residential REIT Inc. (ARR)||18.5%|
|Ellington Financial Inc. (EFC)||14.7%|
|Orchid Island Capital Inc. (ORC)||17.3%|
|Oxford Square Capital Corp. (OXSQ)||13.5%|
|San Juan Basin Royalty Trust (SJT)||22.5%|
|SL Green Realty Corp. (SLG)||13.3%|
AGNC Investment Corp. (AGNC)
Forward dividend yield: 14.5%
A real estate firm of a different stripe, AGNC deals in so-called “agency” mortgage debt — a trait that should be obvious by the ticker symbol. In order to support home ownership, there are U.S. government agencies that include Fannie Mae, Ginnie Mae and Freddie Mac that help provide mortgage financing services — particularly to first-time homeowners or those who struggle to find affordable housing. That federal support helps backstop these loans and provide some certainty. Investing in this mortgage debt can mean significant interest payments to AGNC. Unfortunately, however, the company tends to borrow heavily to invest in these securities — so the rising interest rate environment is actually a net negative and has created a headwind for share prices. That said, even if you don’t like the volatility it’s hard to argue with the generous dividend yield.
Armour Residential REIT Inc. (ARR)
Forward dividend yield: 18.5%
Armour is another monthly dividend stock that focuses on residential mortgages protected by the government. These include agency debt backed by fixed rate, as well as hybrid and adjustable-rate home loans. As with some of the other real estate stocks, ARR is structured as a REIT, or real estate investment trust. That means it must distribute at least 90% of its taxable income as dividends to shareholders — creating a mandate for big and regular payouts. ARR stock has slumped about 3% year to date in 2023 through April 18 (including dividends), while the S&P 500 has actually advanced. But if you take into account the massive monthly yield, the total return of this stock still makes it worth consideration moving forward.
Ellington Financial Inc. (EFC)
Forward dividend yield: 14.7%
Another investment company with a monthly payout and a massive yield is Ellington Financial. This company invests in mortgage-backed securities like some of the earlier names on this list, as well as consumer-related debt, corporate loans and other financial assets. The mortgage business is the core part of operations, however, so this company also qualifies as a REIT for federal income tax purposes. It’s also worth noting that, unlike some of the other stocks on this list, EFC has actually increased its dividend lately with payouts up to 15 cents per month compared with 14 cents back in 2021.
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Orchid Island Capital Inc. (ORC)
Forward dividend yield: 17.3%
As warned, we arrive once again at the real estate sector with Orchid Island Capital. This specialty finance company invests primarily in residential mortgage-backed securities in the United States, and like other REITs it distributes dividends equal to at least 90% of its taxable income to its stockholders. Depending on the charting tool you use, the share price may look wonky over the last year as the company executed a 1 for 5 reverse split in July that consolidated the shares into a smaller number of securities that now trade at a higher per-share price. But the bottom line is that annualized based on its new dividend rate of 16 cents per month, the dividend is among the highest on Wall Street.
Oxford Square Capital Corp. (OXSQ)
Forward dividend yield: 13.5%
Oxford Square is a business development company, or BDC. This kind of company operates almost like a hedge fund, looking for returns wherever it can find them. That includes private equity investments, “mezzanine” financing that’s a kind of hybrid between debt and equity, and both senior and junior debt offerings. It concentrates its investments in “goldilocks” companies that are neither too big nor too small, most having annual revenues of less than $200 million so they are large enough to be serious concerns, but not so small that they could just get financing at their local bank branch. Particularly if the economic disruptions of the pandemic have truly settled down and the worst of inflation and supply chain disruptions are over, now is a great time to consider monthly dividend stocks like this BDC.
San Juan Basin Royalty Trust (SJT)
Forward dividend yield: 22.5%
OK, take it easy before you dive in headfirst to this stock based on the yield alone. This roughly $500 million stock is what is sometimes referred to as a “depletion” trust, meaning the assets you are buying into as a partner are the fixed reserves of fossil fuels under the ground and your returns are based on the extraction and sale of that oil and gas. It should go without saying that energy prices have been pretty favorable for drillers over the last 12 months, and that has inflated payouts. Furthermore, SJT brought a significant portion of its reserves to market. But after oil prices recently bottomed out at a 52-week low under $80 a barrel, down from more than $115 last summer, it may not be realistic to expect quite that level of generosity going forward. Still, if oil prices remain firm and the San Juan Basin reserves are ample, you could still snag double-digit yield via monthly dividends.
SL Green Realty Corp. (SLG)
Forward dividend yield: 13.3%
The $1.5 billion SL Green is among Manhattan’s largest office landlords, operating an integrated real estate investment trust that commands interests in 88 buildings totaling more than 38 million square feet. Real estate companies are among the most common monthly dividend stocks, as they have regular rent checks from tenants that can support regular distribution. And while SLG’s monthly payout has dipped from just under 32 cents per share in early 2022 to about 27 cents presently, and the share price has been under pressure as a result, the annualized yield is simply tremendous right now.
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7 Best Monthly Dividend Stocks With High Yields originally appeared on usnews.com
Update 04/19/23: This story was published at an earlier date and has been updated with new information.