Owning a portfolio of high-quality dividend stocks can provide you with an extra source of income in addition to offering the potential for capital appreciation. That combination likely has some intrinsic appeal for most investors, but it's particularly beneficial for retirees.
Stocks that pay monthly dividends have the added benefit of distributing payouts at more frequent intervals, which can make budgeting easier for investors who are in their non-working years. If you're looking for companies that have established track records of paying dividends on a monthly basis, Realty Income (O 0.08%) and Shaw Communications (SJR) are top stocks in the category. Let's take a closer look at these two dividend stocks that pay with some regularity.
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1. Realty Income
As you might guess from the company's name, Realty Income is a real estate investment trust (REIT). Realty Income generates funds from leasing out commercial real estate properties to businesses. By virtue of being registered as a REIT, the company is also required under SEC guidelines to pass along at least 90% of its taxable income to shareholders each year.
Realty Income's status as a REIT means there's relatively little risk of the company opting to cut its payout, and it's very likely that it will continue to pay dividends on a monthly basis. The act of returning cash to shareholders at that interval is so important to Realty Income that it actually brands itself as "the monthly dividend company."
The company declared its 602nd consecutive monthly dividend in mid-August, and it has raised its payout 107 times since going public in 1994. Realty Income stock has fallen roughly 15% year to date amid pressures created by the coronavirus pandemic. On the other hand, the sell-offs have also had the effect of elevating the company's dividend yield -- which currently sits at roughly 4.6%.
Despite the challenges at hand, Realty Income's portfolio looks relatively well-positioned to weather economic pressures and industry shifts compared to many other REITs. While the brick-and-mortar retail space is facing disruption from the growth of e-commerce, Realty Income's highly diversified tenant base largely consists of businesses that won't easily be outmoded by the growth of online retail. Its largest tenants include Walgreens, 7-Eleven, Dollar Tree, and FedEx, and the company rents more than 6,500 properties to businesses operating in over 50 different industries.
Realty Income has historically had a very high occupancy rate (98.5% last quarter), but it's possible the company will see new coronavirus-related vacancies because it also rents to major chains in highly affected industries, including gyms and movie theaters. On the other hand, most of the company's lease agreements last between 10 and 20 years, meaning that it faces lower risk of unexpected vacancies. Realty Income's portfolio still looks pretty sturdy, and patient investors could be rewarded by both stock gains and continued dividend growth.
2. Shaw Communications
Shaw Communications is a Canadian telecom company that currently stands as one of the country's largest cable providers. The company is valued at roughly $10 billion and trades at approximately 19 times this year's expected earnings, and it deserves a spot on your shortlist if you're seeking stocks that pay monthly dividends.
While cord-cutting trends have been putting the hurt on the pay-TV industry, Shaw also operates internet and mobile phone service businesses and has been making investments to bolster its position in those segments. These expenses have left less room for raising the dividend, and the company's fluctuating payout has been roughly flat over the last five years. However, shares already sport a forward yield of 4.8% and look worthwhile for investors who aren't prioritizing near-term payout growth.
The stock has fallen roughly 6.5% in 2020, and it looks attractively valued at current prices. The coronavirus spurred the temporary closure of the company's Freedom Mobile stores, which in turn meant relatively weak performance for the company's wireless service business. However, the coronavirus-related pressures should begin to diminish eventually, and the essential nature of internet and wireless service suggests that the business should hold up relatively well in the event of a more sustained recession.
As a budget-focused carrier, Freedom Mobile might also see increased demand in the event of a prolonged economic downturn. The company also provides phone and internet services to both consumers and businesses, which provides some additional fortification by way of diversification. Shaw Communications stands out as a solid defensive play and a top monthly dividend stock.
