Most dividend-paying companies distribute dividends quarterly, but some pay out monthly dividends. Monthly dividends are an attractive form of cash flow, especially for investors looking to add to a fixed income. Finding the strongest, most consistent dividends takes a little more research, but is well worth the effort.
Realty Income has a strong track record
Realty Income (NYSE:O) is a Real Estate Investment Trust, or REIT. REITs are required to pay out 90% of income as dividends and aim to invest in growing assets.
At 3.7%, Realty Income doesn't pay a huge dividend, but it has a strong record of payout consistency regardless of market conditions. Realty Income has raised its dividend for 89 consecutive quarters, and has made 593 consecutive monthly dividend payments. This is a sleep-well-at-night income-producing investment.
Realty Income focuses on single tenant leasing in the commercial property space. The company's tenant roster is dominated by investment grade companies, led by Walgreens, 7Eleven, and FedEx. Illustrating the portfolio's stability, the occupancy has never been below 96% occupancy at year-end going back to 1992, and is diversified across 49 different industries.
Realty Income is trading right in the middle of its 52-week range. The company is moving forward with new property acquisition and expanding its portfolio with average lease terms of 15.5 years. When it comes to a monthly paying dividend stock without drama, Realty Income looks like a great pick.
Main Street Capital's conservative management is a winner
Main Street Capital (NYSE:MAIN) is a blue-chip business development company (BDC), which means it provides debt and equity capital to middle market companies to support management buyouts, recapitalization, growth investments, refinancing, or acquisitions.
Like REITs, BDCs have to pay out almost all of their earnings in the form of dividends. The downside is that consistent dividend payouts are difficult to maintain when cash is not retained, and sometimes dividends have to be cut after a slow quarter or two.
Main Street Capital sidesteps this problem by being one of the most conservatively managed high-yield stocks an investor can buy, paying out relatively low monthly dividends, with special dividends twice a year.
The current yield is 5.6%, paid monthly, excluding supplemental dividends. Including supplemental dividends, the current yield jumps to 6.8%.
It was founded in the late 1990s, and Main Street Capital's founders still run the company. Sticking together, this team successfully guided the company through the financial crisis. Main Street is one of the few internally managed BDCs, meaning management works for the shareholders, rather than themselves.
But any BDC investor should know that BDCs are economically sensitive and therefore vulnerable to recessions. Main Street Capital performed well during the last recession, continuing dividend payments. A recession is not currently on the horizon, but investors should remain aware.
The long tenure of the executive team, conservatively managed portfolio, and attractive yield make Main Street Capital a safe choice of monthly dividend-paying stock.
Stag Industrial's properties are the backbone of America
Stag Industrial (NYSE:STAG) is an industrial REIT that runs a portfolio of single tenant light industrial buildings.
Not at all glamorous, typical properties include light manufacturing facilities, distribution centers, and warehouses. These are not structures people love to see from living room windows, but they house the bedrock of the economy.
Savvy investors know, though, that gritty, necessary cogs in the economy like this one offer profit and stability.
Stag Industrial converted to a monthly payout in 2013, and has raised its dividend every year. The shares currently yield 4.6%.
Stag Industrial is trading at the high end of its 52-week range, but considering the warehousing and distribution centers are at the center of the e-commerce boom, it could run much higher. The company may not be glamorous, but dividend payouts are consistent and dependable.
Choosing the right monthly dividend stock for you
All three of these monthly dividend payers are attractive, consistent, and strong, so the kind of investor you are will play a role.
If you are looking for the most steady-Eddie monthly dividend payer of the three, without being particularly concerned about capital appreciation, Realty Income is probably for you.
Next is the conservatively managed BDC, Main Street Capital, which pays well but is potentially vulnerable if a recession occurs.
Finally, Stag Industrial is poised to benefit from e-commerce and is trading at the high end of its range, so it's an interesting play if you can handle a small amount of economic expansion risk.