Monthly dividend stocks are a hidden gem that many income investors are unaware of. While most stocks pay dividends on a quarterly basis, there are a few dozen stocks that pay monthly dividends, making them preferable for many investors. These stocks often have market caps in the hundreds of millions rather than billions, making them more obscure but potentially more lucrative.
One advantage of investing in monthly dividend stocks is the ability to receive more frequent payouts, which can be especially beneficial for retirees or those looking for a steady stream of income. In comparison, quarterly dividends can be disappointing and unpredictable. By spreading a $500,000 portfolio across five monthly dividend stocks, investors can simplify their retirement planning and potentially increase their yields.
Most monthly dividend payers fall into high-yield categories such as real estate investment trusts (REITs) and business development companies (BDCs). These stocks typically offer payouts ranging from 5.8% to 15.6%, providing investors with a consistent income stream. However, it is important to carefully analyze these high-yield stocks to ensure that the payouts are sustainable and not at risk of being reduced in the future.
One example of a monthly dividend stock is Apple Hospitality REIT (APLE), which owns 224 hotels in 37 states. Despite facing challenges such as economic slowdowns and high interest rates, APLE offers a dividend yield of 6.2%, making it an attractive option for income investors. Similarly, Realty Income (O), a net-lease real estate firm, offers a dividend yield of 5.8% and has a strong track record of growth and stability.
AGNC Investment Corp. (AGNC) is another monthly dividend stock to consider, with a dividend yield of 15.6%. Specializing in mortgage-backed securities, AGNC has been impacted by rising interest rates and inflation but offers potential for growth if the Federal Reserve eases monetary policy. Main Street Capital (MAIN) is a top business development company that pays monthly dividends with a yield of 6%, although its high valuation may give investors pause.
PennantPark Floating Rate Capital (PFLT) is another monthly dividend stock worth considering, with a dividend yield of 10%. Primarily investing in middle-market companies, PFLT offers a relatively stable investment option with a solid track record of growth. However, investors should be aware of the company’s rate sensitivity and potential risks associated with a rapid pullback in interest rates.
Overall, monthly dividend stocks offer income investors a unique opportunity to receive more frequent payouts and potentially higher yields. By diversifying a portfolio with monthly dividend payers such as APLE, O, AGNC, MAIN, and PFLT, investors can build a steady income stream for retirement and take advantage of the benefits of monthly dividends.
