Most stocks pay their investors quarterly at best. That makes it a bit more challenging for those who rely on these payments to cover their monthly bills. While they can choose to invest in three sets of stocks that are on different payment cycles, an easier way to generate a consistent monthly income stream is to invest in a stock that pays a dividend every 30 days.
While a few stocks pay monthly, one enticing option worth considering is Canadian midstream company Pembina Pipeline (PBA -1.17%). Not only does it currently offer a yield of 4.7% -- well above average -- but it has lots of growth coming down the pipeline, which should enable the company to continue increasing its payout for the next several years.
A rock-solid monthly income stream
Pembina Pipeline currently supports its high-yielding monthly dividend with excellent financial metrics. The pipeline company gets 86% of its cash flow from predictable sources like fee-based contracts with financially secure customers. That's an improvement from 2015 when the company received 77% of its cash flow from stable fee-based sources.
Meanwhile, Pembina Pipeline pays out only about 57% of that stable cash flow to investors in support of its dividend. That's a much more conservative level compared to 2015 when the company paid out 72% of its cash flow. Finally, it has an investment-grade-rated balance sheet backed by low leverage metrics that have also improved over the past few years as Pembina has executed its growth plan.
Not only has Pembina's financial profile grown stronger over the last few years, but the company has been able to continue increasing its dividend. Overall, the payout has grown at a 4.5% compound annual rate in the last decade, including by 5.3% this year.
Enticing growth prospects
That dividend growth should continue for the next several years given the expansion projects that Pembina Pipeline has under construction and in development. The company currently has 5.5 billion Canadian dollars ($4.2 billion) of expansion projects under construction that it expects to complete by the middle of 2023. These include several midstream infrastructure projects like pipeline and terminal expansions, as well as a large-scale petrochemical facility that it's building in Western Canada as part of a joint venture with a subsidiary of the Kuwait Petroleum Corporation. These investments should enable Pembina to grow its cash flow at a healthy rate over the next several years.
Meanwhile, the company has the potential to invest more than CA$10.5 billion ($7.9 billion) on projects it currently has in development. Roughly CA$4 billion ($3 billion) of those opportunities are for pipeline and facilities expansions in Western Canada. The company is also working on a CA$6.5 billion ($4.9 billion) LNG export facility along the coast of Oregon, though it would probably bring on partners to help fund between 40% to 60% of that project's cost. Pembina's ability to secure some of these additional expansion projects would enhance its growth prospects over the next several years.
An excellent option for a monthly income stream
Pembina Pipeline is an ideal stock for income-seeking investors to buy. Not only does it pay them each month, but it backs its high-yielding payout with a solid financial profile. On top of that, the company has a large backlog of expansion projects, which should enable it to grow its cash flow and dividend at a healthy pace for the next several years.