Income investors love the benefits of stocks that pay their dividends monthly, whether they are retired, looking for income or active investors parking their profits. According to the Excel list that was just updated by WallStreetNewsNetwork.com, there are almost 300 different securities that pay monthly, most with very high yields. Technically, these stocks are real estate investment trusts, oil income trusts, closed end bond funds, and closed end income stock funds, which pay dividends every month. The advantages to having monthly dividends versus quarterly or annual dividend stocks are that the invested capital is returned faster, compounding takes place quicker, and there is usually less stock price volatility. Additionally, many monthly dividend investments pay tax free income. Here are a few that may be worth investigating.
Gas Natural Inc. (EGAS), formerly known as Energy, Inc., is a distributor of natural gas in Montana, Wyoming, North Carolina, and Maine. It was founded in 1909. The stock pays a yield of 5.1% and carries a price to earnings ratio of 7.03.
Baytex Energy (BTE) is an investment trust which generates income from petroleum and natural gas properties. It generates a yield of 5.1%, and has been paying monthly since 2006. The company trades at 23.5 times forward earnings.
Blackrock Apex Municipal Fund Inc. (APX), founded in 1987, owns medium-to-lower grade or unrated municipal bonds, and sports a yield of 6.2%. It sells at a discount to net asset value in excess of 12.7%. Management fees are 0.68%.
Realty Income Corp. (O), with the great single letter stock ticker symbol, yields 5.1%. This real estate investment trust which specializes in commercial retail real estate, has been around since 1969. The stock trades at 16.9 times forward earnings.
Calamos Convertible & High Income (CHY) has a fairly high yield of 8.2%. It trades at about a 1.5% discount to net asset value. However, the management fee is a bit on the high side at 1.13%. This CEF, founded in 2003, invests in high yield fixed income securities and convertible securities.
Provident Energy Trust (PVX) is a Canadian income trust which generates a yield of 8.7% through the marketing of natural gas liquids. It was founded in 1993. Be aware of Canada's new legislation taxing trust income in effect this year, which would tax the trusts at the corporate level in addition to the shareholder level. However, many analysts believe that this taxation is build into the price of these Canadian trusts.
Some things to keep in mind when you are doing your due diligence and analysis on these investments. Be careful of the ones with high management fees, watch out for the ones with limited liquidity and which trade very few shares on a daily basis, and if you invest in the municipal bond closed end funds, make sure you know the consequences of the Alternative Minimum Tax. You also want to find the ones that trade at a discount to net asset value, and avoid the ones using excessive leverage.
Remember, very high yields may not be sustainable.
Disclosure: Author did not own any of the above at the time the article was written.