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2 Stocks That Cut You a Check Each Month

By Eric Volkman – Dec 17, 2021 at 2:20AM

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These two very successful niche operators have been handing out monthly dividends for many years running.

In this current era, where change often moves with lightning speed, who wants to wait three months to receive a dividend? Is it because the decades-old standard quarterly dividend is still very much the norm? Why can't it be the exception?

Well for a select group of dividend-paying companies, distributing a chunk of profits in the form of a regular monthly dividend is the norm. Let's take a closer look at two of them -- Realty Income (O 1.55%) and Gladstone Land (LAND 3.48%) -- and see if getting paid each month by these dividend stocks is right for you.

A desk calendar made up of $100 bills.

Image source: Getty Images.

1. Realty Income

Realty Income, a real estate investment trust (REIT) that focuses on retail properties, is the standard-bearer for monthly dividend payers. There's a reason it has trademarked its descriptor as "The Monthly Dividend Company." It's been doling out a steadily increasing payout every turn of the calendar since its shares were listed on the New York Stock Exchange way back in 1994.

The company has thousands of sources of revenue. At the end of its most recently reported quarter, its massive portfolio comprised 7,018 properties. Nearly all of these were located in the U.S., but the company is branching out; in September, it closed its first transaction on the European continent -- a 93 million euro ($105 million) sale/leaseback deal with French supermarket operator Carrefour on seven properties in Spain.

Given this financial commitment, and the obvious enthusiasm with which the company announced it, we can expect much greater expansion in this huge new market for the REIT.

Meanwhile, Realty Income continues to grow its fundamentals at admirable rates. In the third quarter, it managed to lift its total revenue by almost 22% on a year-over-year basis. Growth in the company's adjusted funds from operations (AFFO), the most important profitability metric for REITs, soared even higher at 26%.

Nearly all of those 7,000-plus properties are home to active businesses, as Realty Income's occupancy rate is just under 99%. The company rents its spaces out on triple-net leases that have very long terms (the average is nearly nine years). This provides a very solid tenant base for the REIT and effectively locks in years of sturdy cash flow. No wonder the company is willing to share its wealth so frequently.

Realty Income's latest monthly dividend was a shade under $0.25 per share. At the latest closing share price, this yields 4.4%.

2. Gladstone Land

Elsewhere in the REIT sector, we have Gladstone Land. This company's focus is on farmland and assets related to the same, i.e., properties that are rented under triple-net leases to their tenants. Gladstone owned 160 farms covering more than 108,000 acres across 14 U.S. states as of November. All of its properties are under lease.

Are you saying you've never heard of an agricultural properties REIT? That's not surprising. There are only very few on the market and of that small group, Gladstone is far and away the largest and most significant.

Gladstone tends to favor farms that grow fresh produce and select "permanent" crops like nuts and blueberries. It believes these are more profitable and can thus produce higher rental income. These crops also tend to require lower storage expenses and are less volatile in price than commodity crops such as wheat and corn.

This focus makes for a good business strategy. Thanks to organic growth (no pun intended) and net additions to its property portfolio (33, to be exact), Gladstone posted a robust 40% year-over-year increase in revenue in its Q3 (to just under $19.6 million). AFFO saw an even higher leap, bounding 66% upwards to nearly $5.3 million. 

That's entirely in character for Gladstone, which over the past few years has seen dramatic improvements in both revenue and AFFO.

All this means Gladstone has plenty in its financial tank for a dividend that gets distributed 12 times per year. The dividend has been paid without fail since the company listed on the stock market in 2013.

The payout isn't immense in either absolute terms (the latest one was less than $0.05 per share) or yield, which these days is 1.8%. However, the regularity of this reliable monthly dividend, Gladstone's strong position in its very limited niche, and its vast scope for expansion make it a compelling stock worth considering. After all, this is a huge country that still has plenty of agricultural lands available to develop.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns and recommends Gladstone Land. The Motley Fool has a disclosure policy.

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