The vast majority of stocks that pay dividends distribute the payments on a quarterly basis. But there are some that offer monthly dividends, which means you get 12 dividend checks per year that you can either use as passive income or reinvest in the stock. And if you own a couple of these monthly dividend stocks, the income they produce can add up pretty quickly.
Monthly dividend stocks may be of particular interest to retirees, who can use that extra cash to supplement their retirement income. Here are two stocks that pay investors pretty well each month.
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LTC Properties -- $0.19 per share monthly dividend
LTC Properties (LTC 0.34%) is a real estate investment trust, or REIT, that owns and invests primarily in senior housing and nursing homes through a variety of structures, including sale-leasebacks, mortgage financing, joint ventures, construction financing, and structured financing. It has a portfolio of 181 investments in 27 states run by 29 different organizations and partners.
As a REIT, LTC is required by law to pay out at least 90% of its taxable income in dividends. Most of the companies that pay monthly dividends are REITs or business development companies, also known as BDCs, which have the same requirement.
LTC has one of the highest monthly payouts in the industry at $0.19 per month for a yield of 5.51%. So, if you owned 500 shares, that would be $95 per month and $1,140 per year. LTC has maintained that $0.19 payout since 2016.
LTC's stock price was down about 7.5% in 2020, but it is up roughly 6% year to date through the end of February. Over the last 10 years it has only returned about 3.3% on an annualized basis, but this is a stock that investors get for the income, not necessarily the return. Last year was tough, but still revenue was essentially flat and net income was up in the fourth quarter year over year.
Over the past decade, LTC has had reliable annual revenue growth -- except for 2020, due to the pandemic. The market remains challenging, so the company doesn't plan to relax its underwriting standards and isn't eyeing any major deals. But as chairman and CEO Wendy Simpson said on the fourth-quarter earnings call, "When the market begins to open up, we plan to use our considerable balance sheet to provide a wide range of regional operating partners with the financing they need to help grow their businesses."
But the long-term care market is one that is expected to grow by 6.8% annually over the next six years, which will be good news for LTC as one of the leaders in this niche.
Main Street Capital -- $0.205 per share monthly dividend
Main Street Capital (MAIN 0.23%) is a business development company, or BDC, the other type of company that is bound by law to pay out 90% of its taxable income in dividends. BDCs, along with REITs, were created by act of Congress to stimulate development. So, they are given preferential tax treatment, but in turn they must pay out most of what they make in dividends.
As a BDC, Main Street Capital provides debt financing and equity capital to lower-middle-market companies with annual revenue between $10 million and $150 million, and debt capital to middle-market companies with annual revenue between $150 million and $1.5 billion.
It has a current portfolio of 175 companies in a range of industries including consumer discretionary, energy, financials, healthcare, industrials, materials, technology, telecommunications, and transportation. It looks for partners with strong management teams with a history of solid performance, deep industry knowledge, and a competitive advantage. Its diversified portfolio and rigorous process for selecting partners makes it one of the best BDCs out there.
Main Street Capital pays out a monthly dividend of $0.205 per share for a yield of 6.7%. It has maintained this $0.205 monthly payout since 2019, and over the last five years it has increased about 17%. Doing the math, 500 shares at $0.205 per share comes out to $102.50 per month in income. For the year, each share would generate $2.46, so with 500 shares that would come out to $1,230 in your pocket annually.
Main Street Capital's stock price was down 19% in 2020, hurt by the pandemic and the overall slowdown in business. However, activity is picking up in 2021 and the stock is up about 13% year-to-date through the end of February. It has a 10-year annualized return of roughly 6%, which trails the S&P 500 index, but this stock is one that's favored by dividend investors.
Earnings were down slightly in 2020 and have been relatively flat in recent years. But with the upcoming stimulus package, economic improvement, and a Biden administration whose policies should favor Main Street businesses more than the previous administration, Main Street Capital should be in solid shape to continue to pay out a rising dividend.
So, if you're a retiree and you held shares of both of these stocks in your portfolio, you'd have some nice passive income to spend every month.
