You can throw a dart in the stock market and find a dividend stock, but like most things in finance, the challenge is finding the signal in the noise. With options ranging from utility companies to volatile mortgage real estate investment trusts (mREITs), to oil pipeline partnerships, choosing the right dividend stocks is the difference between sleeping well with consistent 10% returns and regretting ever trying to invest for yourself.
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One way to make the decision a little easier is to opt for more consistent income. Many companies, including certain REITs and business development companies, or BDCs, pay dividends every month as opposed to quarterly. This not only allows you to compound your capital quicker by reinvesting funds every month, but it also smooths out your income, making life much easier for investors who live off dividends.
In this article, we’ll spotlight seven stocks that pay high monthly dividends spanning from stable “set it and forget it” options to those offering high yield at a high risk.
| Stock | Forward Dividend Yield |
| Main Street Capital Corp. (ticker: MAIN) | 6.9% |
| Prospect Capital Corp. (PSEC) | 11.5% |
| Realty Income Corp. (O) | 5.7% |
| Gladstone Land Corp. (LAND) | 3.6% |
| Apple Hospitality REIT Inc. (APLE) | 5.9% |
| Dynex Capital Inc. (DX) | 11.9% |
| Stag Industrial Inc. (STAG) | 4% |
Main Street Capital Corp. (MAIN)
Main Street Capital, one of the largest business development companies in the U.S., operates like a publicly traded private equity firm. Its key mission is to offer customized financing solutions to small and midsize businesses that are unable to secure their unique funding needs through traditional banks. The allure of BDCs like MAIN, especially for income investors, lies in the fact that they’re designed to pay dividends by distributing 90% of cash flows to shareholders.
Many analysts view Main Street Capital as one of the crown jewels of the BDC sector, as it demands a premium valuation of 1.5x net asset value, or NAV, along with a 12-year track record of dividend growth. MAIN’s management has one of the industry’s better track records for generating long-term shareholder returns and generally being good stewards of capital.
Currently paying a 6.9% dividend yield with monthly payments, MAIN is one of the best options for BDC investors who want to sleep well at night.
Dividend yield: 6.9%
Prospect Capital Corp. (PSEC)
In stark contrast to Main Street Capital’s strong reputation, Prospect Capital Corp. is a BDC with a comparatively poor reputation, trading at a significant discount to net asset value at 0.65x, and hence, pays a hefty dividend at 11.5%.
However, higher yields often signal higher risks. While the 11.5% dividend might catch the eye of yield chasers, the company’s riskier portfolio, write-downs and management’s poor track record might give pause to the conservative income investor.
The upshot here is that markets are priced pretty efficiently. If you want a high-quality BDC like MAIN, be prepared to pay a higher valuation and accept lower yields. But investors willing to look past some of PSEC’s red flags will be rewarded with hefty yields, provided stock price dips don’t offset dividend gains.
Dividend yield: 11.5%
Realty Income Corp. (O)
With more than 236 million square feet of commercial retail space, Realty Income Corp. is a compelling vehicle to profit from the success of American commerce. Its blue-chip tenants, including Dollar General, 7-Eleven and Walgreens, operate under net lease agreements — ensuring the tenants handle all the headaches that an owner normally would.
Boasting a record of 54 years of consecutive monthly dividends, Realty Income is synonymous with reliability in the high-dividend space. And for such a rock-solid stock, it pays a competitive 5.7% yield, comparable with options that arguably carry higher risk.
Realty Income’s future looks bright, too, as the company estimates that the average cap rate of new acquisitions is a whopping 6.9%. That’s far higher than most commercial real estate investors have become accustomed to in recent decades.
Dividend yield: 5.7%
[READ: 8 Best Real Estate Stocks to Buy.]
Gladstone Land Corp. (LAND)
Arable farmland is scarce. With the global population growing as farmland is increasingly repurposed for urbanization, it’s no surprise that billionaires like Bill Gates are aggressively acquiring farmland. Moreover, farmland has historically been the most stable area of real estate, often exhibiting bond-like volatility.
Gladstone Land Corp.’s portfolio of 115,000 acres of U.S. farmland offers a compelling opportunity to play this long-term macro trend while getting monthly dividend checks. Under triple net leasing agreements, Gladstone leases land to local farmers who grow more stable and high-margin crops like berries and nuts as opposed to the volatile and lower-margin land used for commodity crops like corn.
This strategy has catapulted LAND, enabling it to grow funds from operations at a 41% compounded annual growth rate over the past five years, giving it ample capital to pay dividends. Currently yielding 3.6%, the company has increased its dividend for nine consecutive years.
Dividend yield: 3.6%
Apple Hospitality REIT Inc. (APLE)
Many talking heads proclaimed that hotels were dead with the dual threat of COVID-19 lockdowns and the rise of Airbnb Inc. (ABNB). But despite the challenges, the rebound in hotels has impressed even the most skeptical onlookers. Key metrics like revenue per available room sit near all-time highs while occupancy rates are on an aggressive march back to pre-COVID levels. It’s clear that consumers continue to splurge on travel despite proclamations otherwise.
And one of the best ways to play the hospitality sector’s renewed strength while earning monthly checks is Apple Hospitality REIT, a hotel REIT that owns 220 hotels with over 28,000 rooms. Counting players like Marriott International Inc. (MAR), Hyatt Hotels Corp. (H) and Hilton Worldwide Holdings Inc. (HLT) as tenants, APLE is primarily focused on the upscale market, which has proven to be more resilient to economic stresses.
When it comes to dividends, the company paid a steady 10 cents per share monthly after its 2015 IPO, until APLE’s strong track record was ruined by COVID travel restrictions. It started scaling dividends back up in 2022, reaching 8 cents, leaving upside for the company to raise payments back to 10 cents should the hospitality sector rebound.
Dividend yield: 5.9%
Dynex Capital Inc. (DX)
Dynex Capital is in the volatile mortgage REIT (mREIT) business, loved and hated by income investors. While mREITs offer alluring yields, the high leverage and volatility in the industry make them a high-risk, high-reward investment.
DX’s business model, at its core, is similar to a bank. It raises capital via debt and equity and invests it in loans, in this case, mortgage-backed securities. The company lives and dies by the spread between its cost of funding and the rates of returns it earns from its loan book. When times are good, returns are amplified due to leverage, but the same factor works in reverse, being highly sensitive to changes in interest rates.
While worries about rising interest rates are at a fever pitch right now, market expectations tell a different story. According to the CME’s FedWatch tool, traders expect interest rates to be slightly lower a year from now, opening a window for contrarian investors to take a stand against interest rate worries to earn high yields.
DX’s eye-popping 11.9% yield doesn’t come without its own risks, however. The company is famous for issuing lots of shares, diluting value for shareholders in the process. Nor does the company have a rock-solid dividend history like some other stocks on this list.
But a nearly 12% yield rarely comes without a laundry list of worries.
Dividend yield: 11.9%
Stag Industrial Inc. (STAG)
Stag Industrial is an industrial REIT that gives investors exposure to one of the biggest long-term economic trends: the shift to e-commerce. As e-commerce quickly becomes a larger percentage of retail sales, from 7% in 2015 to 15% in 2023, online stores are making massive investments in fulfillment centers, warehouses and manufacturing centers.
Stag owns a portfolio of 465 such properties boasting 87 million square feet of leasable space, with Amazon.com Inc. (AMZN) and FedEx Corp. (FDX), two companies catapulting retail into the online world, as two of Stag’s largest tenants.
The strategy has worked. Stag has doubled its funds from operations between 2018 and 2023, with cash flows steadily increasing each year. These successful operational results have funded a healthy and growing dividend as well, driving five years of consecutive dividend increases, with the company currently paying a 4% yield.
Dividend yield: 4%
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7 Best Monthly Dividend Stocks to Buy Now originally appeared on usnews.com
Update 09/18/23: This story was previously published at an earlier date and has been updated with new information.
