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2 Stocks That Pay You Each Month

By Dave Kovaleski – Jul 16, 2020 at 6:00AM

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Monthly dividends may be even more important to investors these days.

Most stocks that pay dividends do so quarterly, but there are some that have monthly payouts. The monthly income is a great benefit to many investors, particularly in these difficult economic times. While stock price returns may be down, the dividend can be a reliable source of income that comes regardless of how the stock performs. And, as the distribution comes monthly, it aligns with monthly bill-paying cycles. Alternatively, that money could be reinvested in the stock.

Here are two stocks that stand out for paying reliable monthly dividends.

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Image source: Getty Images.

AGNC Investment Corp.

AGNC Investment Corp. (AGNC 1.19%) is a mortgage real estate investment trust (REIT), which means it buys or originates mortgages and mortgage-backed securities and earns income from the interest on the investments. AGNC, in particular, is an agency mortgage REIT, which means it invests in mortgages backed by federal government agencies. As such, there is lower credit risk compared to non-agency mortgage REITs. REITs are often favored by dividend investors because they are required, by law, to distribute at least 90% of earnings to shareholders annually. However, not all REITs elect to provide monthly distributions. AGNC does. 

AGNC, like all mortgage REITs, suffered a sharp drop in earnings and book value when the pandemic hit as the housing market slowed considerably. Thus, AGNC was forced to lower its monthly dividend from $0.16 per share to $0.12 per share in April, and it has remained there since, paid at a yield of about 11%. Despite the drop, the dividend still comes out to $1.44 per share annually.

Things have stabilized somewhat as the housing market has improved and the Federal Reserve has been buying mortgages to provide liquidity, push rates lower, and bolster the economy. AGNC's tangible net book value per share, which had fallen 23% in the first quarter to $13.60 per share, had climbed to $15.22 per share as of mid-May. The price-to-book value has risen from 0.68 on March 31 to about 0.88 as of Wednesday's close.

With the Fed promising to do whatever it takes to support the markets, including buying mortgage-backed securities, AGNC should be able to maintain and increase that dividend through the recession.

Main Street Capital

Main Street Capital (MAIN 1.49%) is a business development company (BDC) that provides long-term debt and equity capital to lower-middle-market companies and debt capital to middle-market companies. The lower-middle-market companies that Main Street Capital invests in generally have annual revenues between $10 million and $150 million. Like REITs, BDCs must, by law, pay out at least 90% of their net income in dividends. So, like REITs, BDCs are often great dividend stocks, in general.

Main Street Capital is no exception. It pays out a robust $0.205-per-share monthly dividend at a yield of 8.3% at Wednesday's close. The dividend has increased annually for the past nine years straight. So, if you own 500 shares at $0.205 per share, thatʻs $102.5 per month. For the year, the payout per share is $2.46, which, for 500 shares, would be $1,230.

After a first quarter that saw Main Street Capitalʻs earnings per share drop 11% to $0.57, the dividend payout ratio climbed up to about 107%, which is high, but understandable given the unusually difficult quarter. The company did, however, indefinitely suspend its supplemental semiannual dividend in order to maintain its stable monthly dividend.

With its diversified investment strategy and focus on being a long-term to permanent capital provider for the companies it invests in, Main Street Capital is built to weather the storm. As of March 31, it invested in 193 portfolio companies across about 40 industries with the largest holding only representing about 3% of the portfolio. Plus, about 90% of its investments were either deemed essential businesses or continued to operate throughout the pandemic. It's been a proven strategy that has enabled it to consistently grow earnings and increase dividend payouts over the long haul.

These are just two of the top stocks that distribute monthly dividends. There are several other solid options, particularly among REITs and BDCs. But overall, monthly dividends are not that common. For investors looking for reliable income during an uncertain market, they may be worth considering.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

AGNC Investment Corp. Stock Quote
AGNC Investment Corp.
$8.52 (1.19%) $0.10
Main Street Capital Corporation Stock Quote
Main Street Capital Corporation
$34.14 (1.49%) $0.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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