Dividend stocks are likely the best solution for investors who need reliable income right now. But companies typically don't pay them the way consumers spend money. Most bills are incurred and paid on a monthly basis, while most dividends are dished out once per quarter.
There are a handful of exceptions to this norm, however. Shaw Communications (SJR), AGNC Investment (AGNC -1.93%), and Stag Industrial (STAG -2.40%) are not only dividend stocks well worth considering, but these three stocks pay their dividends every month rather than once every three months.
Let's find out a bit more about these three companies and whether they might be right for your portfolio.
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1. Shaw Communications
Dividend yield: 5.1%
U.S. investors may not be familiar with the company, but Canadian investors know the name. Shaw Communications is Canada's biggest cable TV, broadband, and mobile phone service provider. More than 7 million customers drove CA$5.4 billion worth of revenue during the fiscal year ending in August, which Shaw turned into net income of CA$175 million. It's not a ton of money, but then again, shareholders aren't splitting up the portion of profits earmarked for dividends with a bunch of other investors. Shaw Communications sports a modest market cap of only $9.1 billion.
More importantly, the business model for this company lends itself to reliable dividends.
While cable customers can cut the cord and wireless customers can change providers, most subscribers stick around, and all of them pay their monthly bills. As long as Shaw manages its expenses wisely and prices its services competitively, there should be something left over to pass along to shareholders.
And there has been. Last fiscal year's earnings of CA$1.32 per share -- a slightly off year -- is still more than enough to cover its current annualized dividend of CA$1.18 per share. Perhaps even better, despite the earnings lull, adjusted EBITDA and EBITDA margins (as well as free cash flow) were up significantly year over year. The payout is pretty well protected.
2. AGNC Investment
Dividend yield: 9.5%
AGNC Investment is a real estate investment trust, or REIT. That just means it's structured to efficiently pass income produced by the REIT's portfolio along to investors. However, this real estate investment trust doesn't actually own real estate. Rather, AGNC Investment invests in mortgage-backed securities issued by government agencies like the Government National Mortgage Association, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corp. You know these companies by their more colloquial names Ginnie Mae, Fannie Mae, and Freddie Mac.
Not all of these agencies are still supported by the "full faith and credit of the U.S. government" as they once were. But they've all been given authority to borrow as needed from the U.S. Treasury. In other words, they're considered just about as safe as risk-free U.S. Treasury securities.
So how does a REIT that owns little more than super-safe, government-supported, mortgage-backed securities produce a dividend yield of nearly 10%? In simplest terms, leverage. Most of the company's $70 billion mortgage-backed securities portfolio has been bought with borrowed money, which magnifies the effective net return of those holdings.
The degree of leverage that's applicable at any given time and its subsequent effective net return can change pretty quickly, of course, and it has. AGNC Investment's monthly dividend tumbled from around $1.40 per share in 2010 to $0.12 now, in step with a massive plunge in the country's prevailing interest rates. For that reason, investors needing a specific amount of dividend income in any given month can't rely on this name.
On the other hand, given how unlikely it is that record-low interest rates could sink any lower, AGNC Investment's payout is likely near its absolute low as well. A 9.5% yield for newcomers in the meantime isn't a bad entry point at all. In fact, the dividend may be on the way up soon.
3. Stag Industrial
Dividend yield: 4.8%
Finally, income investors looking for a monthly dividend payer may want to look at Stag Industrial.
Like AGNC Investment, Stag Industrial is a real estate investment trust. Unlike AGNC Investment, Stag Industrial owns actual real estate. The company owns 462 buildings found in 38 different states, renting 92.3 million square feet worth of space to do whatever business it is that its tenants do.
That's a concerning focus in the age of COVID-19. Slowdowns and shutdowns are causing some businesses to close -- temporarily in some cases, and permanently in others. Landlords are on the hook when those tenants leave.
But there are a couple of curious, compelling quirks regarding Stag Industrial's tenants. One of them is that about 40% of its tenants are companies that do e-commerce. These outfits have actually benefited from pandemic-related shutdowns. The other compelling aspect of Stag Industrial's renters is that no single industry makes up more than 10% of its tenant base. In fact, no single tenant contributes more than 3% of its rent revenue, and the majority of its renters produce annual revenue in excess of $1 billion.
This much diversity and this much stability within its renter base has proven beneficial in these tough times. The REIT's occupancy rate as of the end of September was still a solid 96.3%, and as of early November, Stag has collected 98.2% of rent payments it was due for its third quarter. Given the coronavirus-crimped economy, that's impressive.
