Income investors have many reasons to love dividend stocks. Most dividend stocks pay out quarterly or annually giving investors the assurance of supplemental income to offset planned expenses. For example, assume a company with a stock price of $50 pays a quarterly dividend with an annual yield of 5%. Assuming the stock price (and therefore the dividend yield) stays constant, an investor who owns 500 shares would receive $312.50 every three months or $1250 per year.
50 x 500 = 25,000 x .05 = $1,250/4 = $312.50
Stocks of companies that pay regular dividends are considered to be safe stocks. Once a company commits to a dividend it will make every effort to continue issuing that dividend. Cutting or eliminating the dividend completely would be a signal that the company is having financial problems. Yet another reason to love dividend stocks is the benefit that comes from compounding growth if dividends are reinvested over time.
All of these benefits are enhanced when investors choose dividend stocks that pay monthly dividends. In fact, in the case of compounding, investors who reinvest monthly dividends will generally see their annual returns grow significantly. And, although dividend stocks, in general, are less volatile than non-dividend stocks, stocks that pay monthly dividends are generally even less volatile, which can be attractive to investors with a low-risk tolerance.
What companies pay out a monthly dividend? As you might expect, utility stocks are represented. These stocks commonly pay dividends and pay them monthly. Another kind of monthly dividend stock that you’ll see heavily represented in this presentation is a Real Estate Investment Trust (REIT). REIT’s collect rent every month. By law, they are required to pay out a minimum of 90% of their taxable income as dividends. Therefore, paying dividends monthly gives them better control of their tax liabilities.
Quick Links
- Realty Income
- Apple Hospitality REIT
- Global Net Lease
- Vermilion Energy
- Pembina Pipeline Corporation
- Global X Super Dividend U.S. ETF
- Invesco KBW High Dividend Yield Financial Portfolio ETF
- Main Street Capital
- Shaw Communications
#1 - Realty Income (NYSE:O)
Realty Income (NYSE: O) - Current dividend yield: 3.93% -The first of the REIT’s that we’ll focus on is Realty Income and with good reason. The company has been increasing their dividends for over 25 consecutive years, putting them in the elite Dividend Aristocrat club. Plus, unlike the vast majority of REITs, Realty Income has been able to maintain an “A” or higher credit rating. The stock has been on a tear. Year-over-year, share price has shown an increase of 27% including a gain of just over 10% since the start of 2019. These would be important metrics for any stock, but they are particularly significant for a retail REIT. About 80% of their portfolio is from retail tenants. However, a high percentage of the company’s holdings are in stocks of drug stores and dollar store chains that offer consumer necessities at prices that are competitive with e-commerce. Plus, Realty Income is slightly different than other retail REITs in that about 20% of its portfolio is in non-retail spaces such as offices and industrial properties. This gives the stock an added dimension of diversification. In fact, company estimates project that 94% of its portfolio income is protected against both e-commerce and recessions.
About Realty Income
Realty Income, The Monthly Dividend Company, is an S&P 500 company and member of the S&P 500 Dividend Aristocrats index. We invest in people and places to deliver dependable monthly dividends that increase over time. The company is structured as a real estate investment trust ("REIT"), and its monthly dividends are supported by the cash flow from over 15,450 real estate properties (including properties acquired in the Spirit merger in January 2024) primarily owned under long-term net lease agreements with commercial clients.
Read More - Current Price
- $52.66
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 11 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $63.23 (20.1% Upside)
#2 - Apple Hospitality REIT (NYSE:APLE)
Apple Hospitality REIT (NYSE: APLE) - Current dividend yield: 7.33% - Another REIT that’s worth a closer look is the Apple Hospitality REIT. As its name implies, this trust focuses on the hotel industry and is one of the industry’s largest owners of select-service and extended-stay hotels. However, its holdings are made up of only two hotel chains: Hilton and Marriott and it is in the top five of Hilton and Marriott owners in the United States. The REIT, which has a market cap of $3.66 billion, focuses its 241 acquisitions on business travelers in 34 states with particular attention paid to markets such as Los Angeles, San Diego, Atlanta, Dallas, and Nashville. Since 2015, the year APLE became publicly traded, it has generated a steady monthly dividend that is easily covered by a healthy fund from operations (FPO) that was at 89 cents for the first half of 2018. The stock is up over 13% for the year.
About Apple Hospitality REIT
Apple Hospitality REIT, Inc (NYSE: APLE) is a publicly traded real estate investment trust (REIT) that owns one of the largest and most diverse portfolios of upscale, rooms-focused hotels in the United States. Apple Hospitality's portfolio consists of 223 hotels with more than 29,400 guest rooms located in 87 markets throughout 37 states as well as one property leased to third parties.
Read More - Current Price
- $15.44
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $16.80 (8.8% Upside)
#3 - Global Net Lease (NYSE:GNL)
Global Net Lease (NYSE: GNL) - Current dividend yield: 11.70% - For sheer dividend yield, it’s hard to beat Global Net Lease. The company sports a $1.38 billion market cap and an 11.70% dividend yield. But with that reward comes an increased risk. For GNL that risk is a bit of inconsistent growth. In 2017, for example, the company reported a decline of 18% in Funds from operation (FFO) per share. However, overall FFO rose. In 2019, the stock price has been on a bit of a roller coaster. At one point, share price was up over 13%, but has since declined and while still positive for the year is sitting at a growth of just 3% for the year. The dividend payout ratio has been around 97% since 2018. The company has been issuing dividends since 2012 with the last rate increase occurring in 2015. Offsetting that risk somewhat is a portfolio that is heavy in both office (56%) and industrial (35%) tenants. Only 9% of the company’s portfolio has exposure to the retail sector.
About Global Net Lease
Global Net Lease, Inc (NYSE: GNL) is a publicly traded real estate investment trust listed on the NYSE. The firm focused on acquiring a diversified global portfolio of commercial properties, with an emphasis on sale-leaseback transactions involving single tenant, mission critical income producing net-leased assets across the United States, Western and Northern Europe.
- Current Price
- $7.20
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 4 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $9.50 (31.9% Upside)
#4 - Vermilion Energy (NYSE:VET)
Vermilion Energy (NYSE: VET) Current dividend yield: 8.21% - Utility companies are known to be good dividend stocks and when they pay out dividends monthly, all the better. Such is the case with the Canadian oil and gas provider, Vermilion Energy (VET). When considering investing in VET, investors should look beyond their dividend yield of just over eight percent and focus on where the utility’s assets are located. In North America, their assets make up 60% of the production and solid footholds in the Wyoming Powder River Basin and Canada’s gas-rich Manville play. In Australia, the company has two permanently manned off-shore platforms in the Wandoo field. And in Europe, the company receives premium pricing from its gas fields. The company also acquired Spartan Energy, a Saskatchewan oil producer in 2017. The company’s stock has been drawing recent interest from hedge funds and institutional investors –a bullish signal for investors. As confirmation of that signal, VET’s stock had a consensus BUY rating from analysts (as of March 1, 2019) with a target stock price of $40.50.
About Vermilion Energy
Vermilion Energy Inc, together with its subsidiaries, engages in the acquisition, exploration, development, and production of petroleum and natural gas. The company has properties in West Central Alberta, southeast Saskatchewan, Manitoba, and West Pembina in Canada; Wyoming in the United States; southwest Bordeaux and Paris Basin in France; the Netherlands; Germany; Ireland; Croatia; Slovakia; and Australia.
Read More - Current Price
- $8.92
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 1 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#5 - Pembina Pipeline Corporation (NYSE:PBA)
Pembina Pipeline Corporation (NYSE: PBA) - Current dividend yield: 4.70% - Pembina Pipeline Corporation is a behemoth in the North American energy market with a market capitalization of over $25 billion. In 2017, it completed the largest acquisition in its history by making a $7.1 billion purchase of its rival Veresen. Since 2010, the company has increased its daily production volume by 169% and increased its cash dividends by 50% while still maintaining a manageable payout ratio between 55-60%. However, when looking at dividend stocks like PBA, it’s fair to ask about the future. For Pembina, that future looks exceptionally bright with a number of projects slated to be game changers for the company and the stock. One of the most prominent of these is the decision to move forward with the construction of an integrated petrochemical facility in Canada. When constructed, this facility will convert propane into polypropylene – a move that will position Pembina further downstream in the oil and gas value chain. The stock is up nearly 17% in 2019.
About Pembina Pipeline
Pembina Pipeline Corporation provides energy transportation and midstream services. It operates through three segments: Pipelines, Facilities, and Marketing & New Ventures. The Pipelines segment operates conventional, oil sands and heavy oil, and transmission assets with a transportation capacity of 2.9 millions of barrels of oil equivalent per day, the ground storage capacity of 10 millions of barrels, and rail terminalling capacity of approximately 105 thousands of barrels of oil equivalent per day serving markets and basins across North America.
Read More - Current Price
- $36.56
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $56.50 (54.5% Upside)
#6 - Global X Super Dividend U.S. ETF (NYSEARCA:DIV)
Global X Super Dividend U.S. ETF (NYSEArca: DIV) - Current dividend yield: 7.82% - Exchange-traded funds (ETFs) continue to grow in popularity and one fund that has an extremely attractive yield along with a stellar track record of growth is the Global X Super Dividend U.S. ETF. This ETF is built for safety with a portfolio that’s spread among the consumer defensive, cyclical, utility, real estate, and energy sectors. And although it has some attractive names such as Exxon Mobil among its top holdings, no stock is more than 3% of their portfolio. Morningstar gives it a “low risk” rating. Since its inception in 2013, it has delivered a solid return of 7% per year. The stock price has been steadily rising in 2019 and is sitting on about a 7% gain as of March 4. In addition to a dividend that has been steadily growing (it was around 6% in 2018), the fund has a low 0.45% expense ratio.
About Global SuperDividend US ETF
The Global X SuperDividend U.S. ETF (DIV) is an exchange-traded fund that mostly invests in high dividend yield equity. The fund tracks an equally weighted index of 50 high-dividend, low-volatility securities. DIV was launched on Mar 11, 2013 and is managed by Global X.
- Current Price
- $18.06
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 17 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $18.06 (0.0% Downside)
#7 - Invesco KBW High Dividend Yield Financial Portfolio ETF (NASDAQ:KBWD)
Invesco KBW High Dividend Yield Financial Portfolio ETF (NASDAQ: KBWD) - Current dividend yield: 8.58% - Another ETF that offers an exceptional yield is this fund from Invesco. KBWD has a very small number of holdings that are heavily concentrated in mortgage REIT’s. However no one single asset makes up more than 6% of its portfolio. Over 90% of the fund’s assets are in banking, insurance and financial services stocks. The fund offers stable management. Since launching in 2010, the fund has been run by the same fund managers, which is not always the case with an ETF. Investors may get scared off by an expense ratio of 2.4%. However this number is due, in large part, to the requirement that the fund include the operating expenses of private equity holdings in that ratio. Its net expense ratio is a much more palatable 0.35%. The stock price is currently up over 9% for the year and the dividend is up from 8.4% last year to its current level of just above 8.5%.
About Invesco KBW High Dividend Yield Financial ETF
The Invesco KBW High Dividend Yield Financial ETF (KBWD) is an exchange-traded fund that mostly invests in financials equity. The fund tracks a dividend-yield-weighted index of US financial firms. KBWD was launched on Dec 2, 2010 and is managed by Invesco.
- Current Price
- $14.62
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 22 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $14.62 (0.0% Downside)
#8 - Main Street Capital (NYSE:MAIN)
Main Street Capital (NYSE: MAIN) - Current dividend yield: 6.27% - Other than utilities and REITs another popular sector to find attractive monthly dividend stocks is in Business Development Corporations (BDCs). With over $4 billion currently under management, Main Street Capital is one of the major players. MAIN is a great source of dividend safety having never cut its dividend, which is one of the concerns that investors have when investing in a BDC. MAIN has taken a conservative approach by issuing a special dividend twice a year. However, in November, 2018 the company announced plans to phase out that dividend over the next five years and will roll it into their normal monthly dividend. This will make the already attractive company that much more attractive. BDCs in general have been outperforming the S&P 500 in 2019 and Main Street Capital is no exception reporting a current gain of over 10.5% YTD. The company has seen its income rise in 12 of the last 13 years, including a 16% growth rate in the five years ending in 2017.
About Main Street Capital
Main Street Capital Corporation is a business development company specializes in equity capital to lower middle market companies. The firm specializing in recapitalizations, management buyouts, refinancing, family estate planning, management buyouts, refinancing, industry consolidation, mature, later stage emerging growth.
Read More - Current Price
- $57.90
- Consensus Rating
- Hold
- Ratings Breakdown
- 1 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $48.80 (15.7% Downside)
#9 - Shaw Communications (TSE:SJR)
Shaw Communications (TSE: SJR) - Current dividend yield: 4.36% - Shaw Communications is Canada’s fourth largest provider of wireless services, which is impressive when you consider that they only entered the sector in 2016. The business model for SJR includes low-cost data packages, an upgraded network and heavy retail distribution which has seen their subscriber base climb to over seven million in 2018. In 2018, the company began marketing its products at over 100 Loblaws grocery stores. By early 2019, the company expects to be available in over 600 retail locations including 140 Wal-Mart stores. Shaw has posted an average dividend growth of 5% over the five years ending in 2017 and currently has a dividend payout of around 8 cents per share. In February, Shaw received a consensus Buy rating from analysts with a price target of $30.65. That would be an increase of over 11.5% from its current level of $27.12. The company’s stock is up just over 8.5% YTD.
About Shaw Communications
Shaw Communications Inc operates as a connectivity company in North America. The company operates through Wireline and Wireless segments. The company's Wireline segment provides cable telecommunications services, including video, Internet, WiFi, phone, satellite video, and data networking through a national fibre-optic backbone network to Canadian consumers, North American businesses, and public-sector entities.
Read More - Current Price
- C$0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
There are a number of benefits to monthly dividend-paying stocks. One of the most attractive for investors is the ability to compound their income more rapidly than what they can do, even from stocks that pay quarterly dividends. But like any dividend stock, investors need to be careful not to focus only on high yield. Attractive yields are frequently unsustainable. Better metrics to look for are a proven history of not only maintaining but increasing their dividend as well as a realistic valuation.
The number of companies that pay monthly dividends is in the hundreds. However, investors looking for stocks that pay monthly dividends will find the majority to be part of a real estate investment trust (REIT) or a closed-end fund. Investors will also find some attractive companies in the utilities sector. All of these sectors come with some risk. For example, REITs frequently have exposure to volatile sectors like retail stores. Closed-end funds pose risks due to the use of financial leverage in building their portfolio.
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