Most dividend-paying companies issue checks quarterly. Unfortunately, for many income-focused investors like retirees, their expenses come monthly, meaning they need to be budgeting wizards or invest in companies that pay out their dividends on a staggered schedule so that they can match their income to their expenses.
However, a small handful of companies makes life easier for income-seeking investors by paying them each month. Two of those more frequent payers are Canadian pipeline operator Pembina Pipeline (NYSE:PBA) and REIT Realty Income (NYSE:O).
A pipeline of steady cash flow
Pembina Pipeline has been a solid income stock over the years. In addition to paying a monthly dividend since its inception in 1997, the pipeline company has routinely increased its payout. Overall, it has given its investors a raise for nine straight years, growing it by around a 5% compound annual rate.
That trend should continue over the coming years. Two factors fuel that view. First, Pembina has a rock-solid financial profile. The company gets more than 90% of its earnings from stable sources like fee-based contracts -- 80% of those agreements are with investment-grade counterparties. The pipeline operator also has a conservative payout ratio of 60% and a solid investment-grade credit rating.
That gives it the financial flexibility to continue investing in expansion projects to grow its cash flow. Overall, it has about $1.1 billion Canadian ($810 million) of projects on track to start service within the next year and another CA$4.5 billion ($3.3 billion) of commercially secured expansions that it can complete in those to come. Those projects should provide Pembina with the fuel to sustain and expand its 6.6%-yielding payout.
The king of monthly dividends
Realty Income has an exceptional history as an income stock. The REIT, which bills itself as "the monthly dividend company," has paid investors each month since its founding in 1969. Overall, it has increased the payout more than 100 times since its initial public offering in 1994, including in each of the last 90 consecutive quarters. It grew the payout at a 4.5% compound annual rate during that timeframe.
That steady dividend growth should continue over the coming years. While the company does have high exposure to retail tenants, which supply about 84% of its rent, nearly half of its tenants have an investment-grade credit rating, implying they have the financial resources to keep paying their bills. Meanwhile, most of its top tenants sell essential goods like gasoline, groceries, medicine, and value-priced items.
Realty Income also has one of the highest credit ratings among REITs and a conservative dividend payout ratio of about 80% of its cash flow, giving int the financial flexibility to continue making value-enhancing investments that grow its portfolio and income stream. It should have no shortage of opportunities, given its estimate that there is $12 trillion of company-owned real estate in the U.S. and Europe alone that it could potentially acquire. The company should have no problem continuing to grow its 4.6%-yielding dividend.
Frequent income with upside
Pembina Pipeline and Realty Income are dream income stocks. They not only pay investors each month but also take things up a notch by routinely increasing their payouts. That growth trend appears poised to continue given their solid financial profiles and growth prospects. They're ideal options for investors seeking a more recurring income stream.