My favorite investment remains the monthly dividend stock. Investors' schedules revolve around a monthly calendar more so than a quarterly calendar. Monthly dividends allow investors to budget their utility expenses, mortgage payments, car payments, smartphone bills, and establish a comprehensive monthly budget. In this article, I want to focus upon seven dividend stocks that provide a monthly income stream to income investors.
Alpine Global Premier Properties (AWP)
Alpine Global Premier Properties is a closed-end fund trading at a 14.53% discount to net asset value. In essence, you are buying $100.00 worth of stock for $85.47. We want to own when others complain about the equity. We all can buy Apple (AAPL) today after a great quarter, but value investing means taking advantage of an opportunity.
As the demand for dividend stocks continues to grow, so does the investor appetite for higher-yielding stocks. For investors looking to pump up the yield on their portfolio, closed-end funds may offer the best opportunity outside of the universe of dividend-paying stocks. With many offering yields in excess of 10%, closed-end funds, which aren't high on the radar of most investors, can be an excellent way to diversify a portfolio while boosting yield.
Generally, closed-end funds are similar to mutual fund companies except that the fund manager works with a fixed pool of capital and its shares trade on the stock exchange. Investors buy closed-end fund shares based on a bid/ask price just like any stock. In many cases, the share price is discounted below the fund's net asset value (NAV) and that creates an opportunity for the investor. The fund manager is paid expenses from the capital pool and the fund's earnings, so a fund with a low expense ratio offers a better opportunity for higher returns. With certain types of closed-end funds, the dividend consists of both a return of capital and income, which can enhance the overall return for investors.
Alpine Global Premier Properties invests primarily in a portfolio of real estate equities from around the globe. About 20% of its managed assets are invested in real estate debt securities. It shares are currently trading at $5.90, well above its September 2011 low of $4.80, but a ways away from its 52-week high of $7.64. Its current dividend, which is distributed monthly, yields 10.14%.
Based on analysts' estimates, its share price currently trades at about a 14.8% discount to its net asset value. One of the reasons attributed to the discount price is the general lackluster performance of global real estate over the last couple of years, which keeps investors from buying into this closed-end fund. But, at the current share price, some analysts view the downside as limited, which makes this an attractive vehicle for income seekers. Alpine Global Premier keeps its risk exposure to a minimum by using low leverage, currently around 5.69% and its low expense ratio (1.31%) is evidence of efficient asset management.
Its relatively low market cap ($610 million) and heavily weighted exposure to real estate equity (albeit globally diversified), adds a risk element that requires keeping its 10% plus yield in perspective. But, the discounted share price is attractive for investors looking to diversify their monthly dividend holdings.
I bought shares in December and sold the position in January. This is based upon the tutelage of Mr. Herzfeld and his constant mantra of being opportunistic in December. I do not currently own any shares due to the fund manager's performance since inception.
To quote Frank Sinatra, "....Regrets I've had a few. But then again too few to mention." In my investing experience, investing in Alpine funds - with a long-term perspective - has been a regret I believe is worth sharing. The Alpine closed-end funds have proven to be mismanaged for a prolonged period of time. The Alpine Global Premier's Initial Public Offering came public on April 26, 2007 at $20. The fund is now trading at $6.00 per share. This is a 70% loss of net asset value over 5 years ago. As with Frank, I live to minimize my regrets.
Student Transportation (STB)
Student Transportation is a Canadian-based business. The company does have operations in the U.S. Dividends are paid monthly, currently about 4.6 cents per share. This amounts to an 8.18% dividend yield.
Student Transportation is North America's third-largest provider of school bus transportation services. This is a business model that slows down during the off summer months but picks up during the school year.
The Chief Executive Office, Mr. Denis J. Gallagher, continues to buy shares. The business model is fairly predictable and a needed service to school districts. I believe the business model warrants an allocation as the 8.18% yield is adequate considering the risks versus rewards.
Atlantic Power Corporation (AT)
Atlantic Power is a power generation and infrastructure company. The company has a diversified portfolio of utility assets in N. America. The business model is to sell electricity to utilities and third parties under long-term contracts. The company's strategy is focused upon creating a stable, contracted cash flow from existing assets to sustain the dividend. Based upon the cash flow statements, I want to identify the entire utility portfolio's results for the most recent quarter. This will be reported on February 29th.
The yield is 7.7%. Monthly dividends are 9.583 cents per month. I have exited my position and want to see what the December 31st quarterly financial data offers in terms of cash flow. I want to identify an increase in free cash flow and less reliance upon secondary offerings. The 3rd-quarter cash flow statement identified weakness that I want to minimize at present prices. My goal is to review the comprehensive loss, identified in the 3rd quarter 10Q page 9, or comprehensive income for the 4th quarter.
Baytex Energy Corp (BTE)
Baytex Energy engages in the acquisition, exploration, development, and production of petroleum and natural gas in the Western Canadian Sedimentary Basin and the U.S. The company's focus is upon dividend growth and monthly dividends.
The company has 29% of 2012 oil production hedged at $95.73 (pdf), per a January presentation. Zero production is currently hedged for 2013 and 2014.
I have sold my position due to the recent price run up from $50 to $59. I believe a pull back is likely if oil prices dip. I look to reestablish a position in the $50 range.
Realty Income Corporation (O)
Realty Income is a 42-year old, publicly traded real estate company. The company pays monthly dividends based upon revenue received from 2,600 commercial properties. Realty Income owns and operates the 2,600 properties in 49 states. The proper;ties are acquired for cash. They operate under long-term leases, primarily with large commercial enterprises that operate multiple locations. The properties are owned for the long term to generate revenue to pay the monthly dividend.
On January 18th, Realty Income cut its 2012 outlook. The company believes the cash flow will be at the lower level of prior projections. One tenant, Friendly's Ice Cream, came out of bankruptcy and rejected 19 of 121 leases. Buffett Holdings, with 86 properties, recently filed for bankruptcy.
I don't personally see the economy turning around. My investments are currently light on real estate positions. Valuations continue to fall.
ARMOUR Residential REIT (ARR)
ARMOUR Residential REIT borrows money at short-term rates, and invests the proceeds in Government Sponsored Entity (GSE) mortgage bonds at higher rates. This net yield difference is then leveraged by approximately 7x. The net yield difference, minus hedging expenses, is paid out in monthly dividends. The company's book value per share, as of September 30th, was $6.78.
The Federal Reserve announced on January 24, that interest rates should remain low until mid 2014 at the earliest. This means ARMOUR should be able to provide monthly dividends for the next two years at least. The economy is in a mini death cycle, and mortgage real estate investment trusts offer significant income until capital is reallocated to emerging markets and a growing economy.
As mentioned in this article, I do not personally have confidence in the management team. This is a personal opinion based upon my view that history tends to repeat itself.
Enduro Royalty Trust Trust Unit (NDRO)
Enduro Royalty Trust is a Delaware statutory trust formed in May 2011 by Enduro Sponsor to own a net profits interest representing the right to receive 80% of the net profits from the sale of oil and natural gas production from certain properties in the states of Texas, and Louisiana, held by Enduro Sponsor.
Enduro's assets are located in the well known Permian Basin in Texas and Louisiana. The monthly distribution is anticipated to be 13.5 cents per share. Per the below table the payouts have exceeded the anticipated distributions. The 8.29% distribution is intriguing, but I have to pass on the trust due to the minimal first-year payout.
I believe there are plenty of opportunities in the undiscovered income universe. It takes a little digging and confidence in your own investing skills. In the long run, this advantage will provide out performance. A losing strategy is buying what herds are buying and buying a stock based upon a two-minute interview on CNBC or Bloomberg. Results have to be accountable. I have yet to view CNBC or Bloomberg follow up on dividend stock ideas in a timely and regular basis.
Disclosure: I am long STB.