Do you want to collect dividend income every month? The bad news is that most dividend stocks only pay quarterly. But the good news is that by investing in multiple income-generating investments, you can ensure that you have cash flow coming in each month of the year. The key is to invest in stocks that pay at different intervals.
Three stocks with different payment schedules that can help you do that are CareTrust (CTRE 1.31%), Citigroup (C 2.82%), and Enbridge (ENB 0.20%). Not only are their yields safe, but they are also well above the S&P 500 average of 1.3%.
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1. CareTrust
A real estate investment trust (REIT) can make for a solid option for income-oriented investors. That's because REITs have to pay 90% of their profits back out to shareholders. And a REIT that is focused on healthcare, such as CareTrust, can help add to the overall stability of the investment (as opposed to residential REITs where there may be more risk involving tenants). CareTrust's portfolio of assets is also diverse, spanning more than two dozen states. And the bulk of them, more than 70%, are skilled nursing facilities.
The key metric that investors need to be familiar with when looking at REITs is funds available for distribution, or FAD. It's a REIT's version of net income, which helps to demonstrate how sustainable its dividend is. Looking at net income alone could suggest that the dividend is not sustainable even though it is, as non-cash expenses oftentimes make a company's operations look worse than they are.
In 2021, CareTrust's normalized FAD per share was $1.59. At its current quarterly dividend payment of $0.275, CareTrust's payout ratio as a percentage of FAD is 69%. The company aims for a payout ratio of approximately 65%, so the current yield is definitely in the ballpark. CareTrust recently raised its payouts this year from $0.265, so there's no sign of concern from management about the current level of the dividend payment.
With a yield of 5.9%, you would need to invest roughly $20,500 into this healthcare stock to collect $300 every January, April, July, and October.
2. Citigroup
Citigroup pays a more modest yield of 4%, but it can help diversify your portfolio while bringing in cash flow for your portfolio every February, May, August, and November. It would take a heftier investment worth $30,000 to result in a quarterly dividend income of $300 in each of those months. But there's potential for the dividend to get bigger, as Citigroup's payout ratio is only 24% of net income.
Investing in a top bank stock at a time when the economy is doing well and interest rates are on the rise could be a great move for investors. But even if things don't go swimmingly this year and there's a recession, you can rest assured that you've bought the stock at a discount; Citigroup trades at nearly half its book value. That's not a bad deal for a company that last year reported $22 billion in net income on revenue of $71.9 billion, for a profit margin of 31%.
Many brokerages see this bank stock climbing to at least $70 or greater within the next two years, suggesting an upside of potentially over 40%. The dividend alone could have been enough of a reason to buy the stock; the potential for the share price appreciation only sweetens the deal.
3. Enbridge
Rounding out this list of top dividend stocks is pipeline company Enbridge. The stock's dividend used to be higher, but it has shrunk because the company's value has risen 25% during the past 12 months -- while the S&P 500 has increased by just 7%. However, even at 5.8%, the yield is right up there with CareTrust's. An investment of about $20,600 should be enough to generate $300 in dividend income every March, June, September, and December.
Like CareTrust, this is another stock where you can't rely on net income to assess its dividend-paying potential. The company uses distributable cash flow (DCF) in place of accounting income to assess the health of its payouts. This year it projects a DCF of at least 5.2 Canadian dollars per share. That represents a payout ratio of 66% based on its current quarterly payouts of CA$0.86, which Enbridge recently hiked for the 27th year in a row. The company has increased its dividends by an average compounded annual growth rate of 10% during that time, and with a strong payout ratio, it looks safe to assume that more rate hikes could be in its future, especially with oil prices at highs they haven't been at in years and the industry performing well.
