Dividend distributions — usually made in cash but occasionally paid out in shares — are payments made by public companies to stockholders. There are many good reasons savvy investors own dividend-paying stocks. Dividends are a direct and tangible way for investors to benefit from the earnings a company generates.
Not only do dividends provide current income but, as they rise over time, can also act as a hedge against inflation. Dividends are an important component of a stock’s total return, which is made up of both capital appreciation and income. Additionally, companies that can afford to pay dividends are seen as shareholder-friendly and financially sound.
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Individual companies can choose their own dividend payout schedules. For normally structured C corporations, there’s no mandate decreeing when or if they must pay dividends. Most stocks that pay regular dividends do so on a quarterly schedule. A small number — roughly 80 — have opted to distribute their dividend income monthly.
Investors who have current income as a primary objective appreciate monthly dividend stocks, which arrive month-in and month-out on a schedule that works well with most people’s cash flow needs. Monthly dividend payers are especially important to retirees and others who are on a fixed budget or use their stock holdings as a source of income.
If you understand the value of dividends and the idea of receiving income monthly is intriguing to you, here are seven of the best monthly dividend stocks to buy now:
| Monthly Dividend Stock | Market capitalization | Trailing-12-month dividend yield |
| Gladstone Capital Corp. (ticker: GLAD) | $466 million | 9.2% |
| Realty Income Corp. (O) | $48 billion | 5.6% |
| Cross Timbers Royalty Trust (CRT) | $79 million | 11.1% |
| Permian Basin Royalty Trust (PBT) | $555 million | 5.8% |
| PennantPark Floating Rate Capital Ltd. (PFLT) | $701 million | 10.8% |
| Agree Realty Corp. (ADC) | $5.9 billion | 5.0% |
| Dynex Capital Inc. (DX) | $775 million | 9% |
Gladstone Capital Corp. (GLAD)
Investors thinking about buying GLAD should be aware that, due to the nature of the investments it makes, this is a fairly aggressive stock.
GLAD is a unique type of financial firm known as a business development company, or BDC. At a basic level, GLAD is an investment firm that invests its assets in fast-growing small to midsized companies. It makes money for shareholders by making high-interest loans to private companies, many of which are looking forward to going public via an initial public offering at some point in the future.
Investors should think of GLAD as being similar to a publicly traded closed-end investment company. Shareholders of GLAD and other BDCs are called unitholders.
GLAD uses a fiscal year that ends in late September which means that the company is already well into the third quarter of its 2024 fiscal year. Wall Street is expecting the company to generate $96 million in revenue in fiscal 2024 and $102 million in fiscal 2025. If it can achieve those numbers, it would represent 6.2% year-over-year revenue growth.
All BDCs must distribute at least 90% of their after-tax income as dividends, a characteristic shared with real estate investment trusts, or REITs.
Market cap: $466 million Trailing yield: 9.2%
Realty Income Corp. (O)
Any good list of the best monthly dividend stocks will likely contain Realty Income. This REIT is one of the longest-standing monthly payers in the real estate sector.
The company owns more than 15,000 income-generating commercial properties in and around major population centers all over the U.S. Its tenant base is mostly well-known, investment-grade corporations operating enterprises like convenience stores, pharmacies and big-box retail stores.
One big reason for this stock’s popularity among income investors is that it is a member of the exclusive Dividend Aristocrats club. Dividend Aristocrats are companies that have raised their dividends for a minimum of 25 consecutive years. O has paid a regular dividend throughout its 55-year history and has a strong track record of increasing its payout.
Its next dividend, which will be paid on May 15 to shareholders of record on May 1, will be the company’s 646th consecutive income distribution.
Market cap: $48 billion Trailing yield: 5.6%
Cross Timbers Royalty Trust (CRT)
At first glance investors might think that CRT is a master limited partnership, or MLP, but it isn’t. CRT shares some characteristics of an MLP but is, in fact, organized as a publicly traded grantor trust.
CRT is an energy company that makes money by collecting natural gas and crude oil royalties on highly productive real estate in Oklahoma, New Mexico and parts of Texas.
CRT is a small company but it generates an outsized amount of income for a firm of its size. Last year the average price of oil was $77.05 a barrel and the company was able to generate revenue of $12.3 million, of which $11.5 million was distributable income, allowing it to pay sizable dividends to shareholders. Right now, oil is trading at close to $78 a barrel, and has spent a good chunk of the year trading in the $80s. If energy prices remain elevated or go higher, it’s very possible for CRT shareholders to see a higher payout and a higher share price over the course of the year.
Market cap: $79 million Trailing yield: 11.1%
[READ: 6 High-Risk Stocks for Aggressive Investors]
Permian Basin Royalty Trust (PBT)
PBT is another royalty trust that all investors seeking a monthly dividend should consider. The reason is simple: PBT holds overriding royalty interests in some of the richest, most productive gas and oil fields in the world.
Geologists at the Bureau of Economic Geology in Texas have estimated that there could be a staggering 74 billion barrels of recoverable oil in the Permian Basin, and that is exactly where PBT owns the bulk of its royalty rights. More specifically, it holds about 125 separate claims that cover more than 51,000 productive acres in the state of Texas.
In addition to the respectable and reliable monthly dividend the company pays, there is a real possibility that shareholders in PBT will enjoy significant capital appreciation over time. If oil and natural gas prices trend higher for the rest of the year, as some experts expect them to do, it will lead to higher revenue for PBT which should be reflected in the share price.
Market cap: $555 million Trailing yield: 5.8%
PennantPark Floating Rate Capital Ltd. (PFLT)
Truist Securities has a “buy” rating on PFLT and, on March 26, JPM Securities reiterated the “market outperform” rating that it holds on the stock. Analyst opinions aside, it appears on this list because of its dependable monthly income and high yield, which currently tops 10%.
PFLT is a finance company that makes first-position, secured loans to small and midsized private U.S.-based companies. Most of the companies it invests in are venture-funded firms in the high-growth or buyout stages of their lifecycles. The company also makes mezzanine loans that have an equity component to them, and takes high-yielding preferred equity stakes in its debtors as well.
The loans issued by PFLT are in a unique category of finance called floating-rate debt. What this means is that the interest rate PFLT charges is not fixed over the life of the loan. Instead, the rate adjusts both up and down based on the current rate environment. These loans are attractive to investors because they are considered less volatile than fixed-rate securities. Preserving shareholder capital is a primary objective of PFLT.
The management team at PFLT is highly experienced and strives for consistent performance over a long-term time horizon.
Market cap: $701 million Trailing yield: 10.8%
Agree Realty Corp. (ADC)
The brick-and-mortar segment of the retail sector has been very challenging over the last few decades as e-commerce has taken the world by storm. ADC is a retail REIT which has truly risen to the challenge of physical location retail. This company has been able to thrive in a difficult industry.
ADC leases retail space to a select group of creditworthy tenants. It rents exclusively on a long-term, net-lease basis. ADC has very few landlord responsibilities. It is the tenants who are responsible for a building’s maintenance, property taxes and insurance costs. ADC simply owns the property and collects rent payments on behalf of shareholders.
According to the company, ADC owns and operates more than 2,100 properties that are spread out over 49 U.S. states. This amounts to more than 44 million square feet of leasable space. Wall Street is estimating $592 million in revenue for ADC in 2024 and is projecting that number to grow 6.7% to $632 million in 2025.
Market cap: $5.9 billion Trailing yield: 5%
Dynex Capital Inc. (DX)
DX is a mortgage REIT (mREIT) that invests its assets in a class of bonds known as mortgage-backed securities, or MBS. DX does not limit its investment activity to commercial real estate but readily puts capital to work in residential property as well.
One thing all investors should know about DX is that it uses leverage as an investment strategy. In simple terms, DX buys mortgage bonds for its portfolio with borrowed money. The leverage DX employs will enhance income and returns on the upside but, unfortunately, will also exaggerate losses on the downside. Obviously, caution is warranted.
DX owns both agency and non-agency bonds in the form of commercial mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS). The practical effect of this diversification is that some of the bonds will carry the backing of government agencies such as Freddie Mac and Ginnie Mae and others will not.
Despite inflation numbers that have proven more stubborn than most market watchers would wish, Wall Street is still predicting a number of rate cuts this year. If those predictions come true and interest rates do moderate, DX and other REITS should be positioned to do well.
Market cap: $775 million Trailing yield: 9%
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7 Best Monthly Dividend Stocks to Buy Now originally appeared on usnews.com
Update 05/06/24: This story was previously published at an earlier date and has been updated with new information.
