My Top 10 Monthly Dividend Stocks: Updated

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Includes: AGNC, APLE, EPR, LTC, MAIN, O, PFF, PSEC, STAG, WSR
by: James Bjorkman

Summary

This is a follow-up to a previous article that I wrote about monthly dividend payers that have proven quite popular with investors.

I summarize different types of monthly dividend payers and some of the pros and cons of choosing them.

I then give my top ten picks among monthly dividend payers for consistency and reliability of income.

Background

I regularly report on opportunities for investors who seek monthly dividend payers. My previous article is here. As evidenced by the feedback that I have received, there is great and continuing interest in this topic.

It is important to stay up to date in this area because companies can change their dividend policies on short notice. As discussed below, some energy companies have been slashing or suspending their monthly dividends recently. Other companies also make changes to their distributions, but the energy sector is a particular trouble spot right now.

Every article about monthly dividend payers will broaden the focus a bit. This article will examine current opportunities among monthly dividend payers, and add some not mentioned in my previous article. At the end, I will include my own top ten picks.

Top Monthly REITs

Relative to the entire stock universe, REITs have a high proportion of monthly dividend payers. Before I go through those stocks, I want to caution that REITs don't have to maintain the same payout scheme, and they sometimes change it without a lot of warning.

For instance, equity REIT VEREIT Inc. (NYSE:VER), formerly known as American Realty Capital, paid monthly dividends through 2014, then suspended its dividend for two quarters. It now pays quarterly. However, there is still a monthly dividend preferred stock issued by the company, as discussed below, which never missed a distribution.

On the flip side, mortgage REIT American Capital Agency Corp. (NASDAQ:AGNC) paid quarterly until late 2014. It then changed to monthly distributions, which it continues.

So, if you are choosing monthly dividend payers to match your income and expenses, it pays to keep an eye on them. A dividend change can happen quickly and is easy to overlook.

The overlying concern at the moment regarding REITs is interest rate risk. The market has been following Fed pronouncements about interest rates as if it were a soap opera, and the pendulum of investor opinion continues swaying wildly from the belief that it must raise rates, to it cannot possibly raise rates. Currently, the pendulum has swung to the former side. REITs are believed to be fated to value in a rising rate environment for reasons that I have discussed at length previously. However, there are contrary factors to consider, such as the fact that much of a rate hike cycle already has been priced into the sector, and what the market really fears is not rising rates, but uncertainty about rising rates.

My own view is that this is a great time to consider buying REITs. They already have fallen in fear of rising rates. They could fall further - anything can fall further - but one thing is certain: you are not buying at the top.

Aside from the aforementioned AGNC, widely followed REITs that currently pay monthly dividends include the following, in no particular order:

  • New York REIT (NYSE:NYRT) (4.0%);
  • Realty Income (NYSE:O) (4.6%);
  • LTC Properties Inc. (NYSE:LTC) (5.2%);
  • Chatham Lodging Trust (NYSE:CLDT) (5.5%);
  • Apple Hospitality REIT, Inc. (NYSE:APLE) (6.1%);
  • Inland Real Estate Corporation (NYSE:IRC) (6.3%);
  • EPR Properties (NYSE:EPR) (6.5%);
  • STAG Industrial, Inc. (NYSE:STAG) (6.9%);
  • Chambers Street Properties (NYSE:CSG) (7.0%);
  • Global Net Lease, Inc. (NYSE:GNL) (8.0%);
  • Bluerock Residential Growth REIT, Inc. (NYSEMKT:BRG) (9.4%);
  • Whitestone REIT (NYSE:WSR) (9.5%);
  • Independence Realty Trust (NYSEMKT:IRT) (9.7%);
  • Gladstone Commercial Corporation (NASDAQ:GOOD) (10.3%);
  • Wheeler Real Estate Investment Trust (NASDAQ:WHLR) (11.2%);
  • Javelin Mortgage Investment (NYSE:JMI) (17.6%);
  • Five Oaks Investment (NYSE:OAKS) (18.5%);
  • ARMOUR Residential REIT, Inc. (NYSE:ARR) (19.0%).
  • Orchid Island Capital (NYSE:ORC) (19.1%);

Some of these stocks already have announced their distributions through the end of the year. The yields given are approximations for comparison purposes only, and subject to daily change.

GOOD bears special mention because it is but one of a family of different entities run by Gladstone Management that pay monthly dividends to shareholders. Each Gladstone REIT has a different investment focus, and aside from GOOD the others include: LAND (invests in farmland), GAIN (a BDC), GLAD (another BDC) and GOODN (REIT). I wrote about GOOD earlier this year here.

Preferred Stock

Many people overlook the opportunities in preferred stocks. I tend to do that sometimes, too, because it is not my specialty. However, the class of preferred stock may be best for some investors. Below, as examples, are two good ones that pay monthly:

  • VEREIT, Inc. 6.70% Series F Cumulative Redeemable Preferred Stock (NYSE:VER-F);
  • Realty Income Corp 6.625% Monthly Preferred (NYSE:O.PRF).

I mention these just to open a window for investors who may not be familiar with the area, but who might be interested in securities that pay reliable dividends (preferred share dividends are often paid even when common stock dividends are suspended) and have relatively little price volatility (the assuredness of the dividend tends to dampen their volatility). You can find a more complete list here.

Generally, investors who trade preferred shares have a lot of experience with them and probably know more about the area than I do. However, even if you are not an expert, you can still participate in these securities. I prefer to invest in preferred shares via an exchange traded fund, as discussed below. If monthly dividends are attractive to you, this may be a field worth exploring.

Top Business Development Companies

There are several top monthly dividend payers in the BDC sector:

  • Main Street Capital Corporation (NYSE:MAIN);
  • Prospect Capital Corporation (NASDAQ:PSEC);
  • Gladstone Investment (NASDAQ:GAIN);
  • Gladstone Capital (NASDAQ:GLAD);
  • Fifth Street Finance Corp. (NASDAQ:FSC).

As shorthand, I tend to think of BDCs as REITs that don't engage in real estate because they have similar tax obligations (most are regulated investment companies for tax purposes). Their businesses have more similarities to venture capital funds, though. BDCs are a great way to invest in startup companies, which most investors can't do otherwise.

Foreign Companies

Another area that may intrigue some monthly income devotees is the world of stocks beyond U.S. borders. It makes sense to look abroad, because the rest of the world plays an increasing role in commerce.

US Stocks as share of global market

That said, there are reasons to be cautious about investing abroad, especially with monthly dividend stocks:

  • You incur exchange rate risk;
  • Dividends can be quoted in foreign currency, causing confusion (such as Canadian or Australian dollars);
  • They may trade on foreign exchanges, though they sometimes are listed in the U.S. or have ADRs here;
  • Foreign companies tend not to follow the U.S. custom of paying the same dividend every month, so the amount varies;
  • Accounting standards overseas are different than in the U.S.;
  • Foreign websites can be difficult to navigate or essentially useless due to language differences or scant information
  • It can be difficult to find current news on companies not covered by the U.S. media.

With the ever-strengthening U.S. Dollar, investing overseas often has not been a good idea in recent years. Still, nothing stays the same forever, so here are some ideas:

  • Banco Bradesco, S.A. (NYSE:BBD);
  • Shaw Communications Inc. (NYSE:SJR);
  • Vermillion Energy Inc. (NYSE:VET);
  • Grupo Aval (NYSE:AVAL);
  • Itau Unibanco Holding S.A. (NYSE:ITUB);
  • Corus Entertainment (OTCPK:CJREF).

Now that I have made the case against them, foreign stocks still can be enticing. Corus Entertainment, for instance, yields over 10%. For now, though, for the reasons discussed above, they are not at this time on my list of favorites.

Some Other U.S. Stocks That Pay Monthly

There are many U.S. stocks that pay monthly. Here are some ideas that have wide followings:

  • Enerplus Corporation (NYSE:ERF) (8.8%);
  • Vanguard Natural Resources, LLC (NASDAQ:VNR) (24.2%);
  • U.S. Global Investors, Inc. (NASDAQ:GROW) (2.3%).

Energy companies have been a traditional source of monthly dividend payers. As anyone following the market this year knows, they have been going through a rough patch. Many have reduced or suspended their dividends. Enerplus, for instance, still pays a monthly dividend, but reduced it from $0.05 to $0.03. The market is pricing in a future dividend cut at VNR, it appears.

Some of the energy companies used to be monthly dividend stalwarts, but no longer. Until recently, Pengrowth Energy Corporation (NYSE:PGH) was in this group, but it switched to quarterly distributions in September 2015 and, at the same time, slashed the dividend. Linn Energy, LLC (NASDAQ:LINE) (oil and gas) also suspended its distribution, as did Baytex Energy Corp. (NYSE:BTE). Generally, dividends throughout the energy sector are unreliable in general, and especially so now with energy prices depressed.

There are other great stocks that are monthly payers, but the above are a sampling of those that I see mentioned more than others.

Exchange Traded Funds that Pay Monthly

There is an entire category of ETFs and mutual funds that pay monthly. There are various lists of them, such as here, but those lists tend to get out of date quickly. Such funds usually are directed at niche markets, such as municipal bonds from a particular state, and pay tiny dividends. Ones that have a relatively large audience that pay monthly include:

  • Vanguard Short-Term Bond ETF (NYSEARCA:BSV) (1.3%);
  • iShares Core Conservative Allocation ETF (NYSEARCA:AOK) (2.1%);
  • PowerShares KBW Premium Yield Equity REIT Portfolio ETF (NYSEARCA:KBWY) (5.6%);
  • iShares iBoxx $ High Yield Corporate Bond ETF (NYSEARCA:HYG) (5.7%);
  • iShares U.S. Preferred Stock ETF (NYSEARCA:PFF) (yield 5.83%);
  • BlackRock Floating Rate Income Trust (NYSE:BGT) (6.0%);
  • Eaton Vance Tax-Managed Global Diversified Equity Income Fund (NYSE:EXG) (11.6%);
  • PIMCO Dynamic Income Fund (NYSE:PDI) (15.3%);
  • PIMCO High Income Fund (NYSE:PHK) (18.4%);

I also recently wrote an article about some other top floating rate funds that pay monthly here. PFF is the way that I play the preferred stock sector; I wrote about it here.

Exchange Traded Notes

One other category of monthly dividend payers merits attention. ETNs are similar to ETFs, but pay interest instead of dividends. UBS Group AG is a leader in this group with its ETRACS lineup, which you can read more about here. These offerings tend to offer unusually high yields, but that comes with a cost. They have not performed well in 2015 due to fears of rising rates.

Popular ETNs include, but are not limited to:

  • MORL (mortgage REITs);
  • CEFL (closed-end funds);
  • DVHL (high yield stocks);
  • DVYL (top dividend paying stocks);
  • RWXL (international real estate);
  • SDYL (high yield Aristocrats).

These ETNs tend to be leveraged, and thus pay uncommonly high yields. That leverage imposes costs and additional volatility that are not suitable for many investors, especially conservative ones. These ETNS are only suitable for sophisticated investors who have performed their own due diligence and understand completely the potential risks and rewards of high yield securities.

My Top Ten Monthly Dividend Payers

Since I have gone through a lot of securities above, those just looking for some straightforward choices might be interested in my own top picks. I gave capsule summaries of my favorites in my previous article, so I will not repeat those here. Instead, below (in no particular order) is a table of the securities in this field that I feel have the best chance of rewarding investors over time (all securities were referenced above). They are in no particular order, though the first two choices - Realty Income and Main Street Capital - are the ones that I consider the most durable dividend payers.

My Top Ten Monthly Dividend Payers

Symbol Type Recent Price Monthly Dividend Yield
O REIT $49.67 $0.1905 4.6%
MAIN BDC $31.14 $0.18 7.0%
PFF ETF $39.12 $0.181 5.8%
APLE REIT $19.29 $0.10 6.1%
EPR REIT $56.39 $0.3025 6.5%
LTC REIT $41.95 $0.18 5.2%
PSEC BDC $ 7.38 $0.833 13.4%
STAG REIT $20.23 $0.115833 6.9%
AGNC REIT $17.96 $0.20 13.28%
WSR REIT $12.11 $0.095 9.53%

All prices as of the close on 20 November 2015.

Generally, I only buy on market dips, because I view income stocks as long-term holds and am not looking for short-term capital appreciation. For instance, I bought some AGNC for the Generation Portfolio that I manage when it dipped recently following a weak earnings report, even though sentiment about it was lousy. I felt the short-term price dump caused it to become oversold relative to its peers, even if it later became cheaper. The above are the monthly dividend paying securities I would have my eyes on when given a proper buying opportunity.

Two of my current picks that I did not address in my previous article are Whitestone REIT and EPR Properties. I recently wrote an article about Whitestone here. While some have reservations about WSR due to events that happened before it began publicly trading, it has been a steady monthly payer for several years now and showing signs of improvement. While not my top choice, WSR has potential.

EPR Properties (NYSE:EPR) is a REIT that focuses mostly on entertainment. ("EPR" is an acronym for "Entertainment Properties"). It has holdings in movie theaters, golf driving ranges, charter schools and other diverse areas. It has been a steady dividend raiser for years, growing it at roughly 6% clip. It switched from quarterly to monthly payouts in 2013 (along with STAG, also on the list).

Conclusion

My list of monthly dividend payers is not meant to be exhaustive. Instead, it is meant to be a travel guide through this complicated area. In general, I see REITs and BDCs as good values due to their price declines related to rate fears. Hopefully, after you do your own due diligence, you will find an attractive security from my lists for your monthly dividend needs.

Disclosure: I am/we are long PFF, MORL, CEFL.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.