Every day of life brings new opportunities to personally grow and build wealth. But it also brings with it new bills that must be paid.
Thus, it's important for investors to build reliable and growing streams of dividend income. That's because people with passive income are free to pursue their passions without fear of whether those passions yield a paycheck.
Here are two dividend stocks that I believe are capable of providing consistent monthly payouts to income investors.
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1. Agree Realty
Agree Realty's (ADC 0.51%) portfolio of more than 1,600 properties in all 48 continental U.S. states makes it one of the largest triple net lease retail REITs.
Agree Realty is a net lease REIT that purchases retail properties from its clients and then leases them back to those same tenants. The appeal to Agree Realty's tenants of a sale-leaseback arrangement is that it provides capital, which can be used to pay down debt or expand the business.
There are significant benefits to the REIT as well. Under the terms of its leases, Agree Realty receives a base rent check each month and isn't responsible for the expenses associated with the properties that it owns, including maintenance, insurance, property taxes, and utilities. And the company's weighted-average remaining lease term of nine years builds a tremendous amount of predictability into its future rent revenue.
Agree Realty's dividend yield is a market-beating 3.7%. This is an especially attractive dividend yield for a company whose monthly dividend is 8.7% higher for the first half of this year than the year-ago period. And since the REIT's dividend payout ratio was just 71% in 2022, there should be plenty of room for dividend growth.
That's because, for one, this low dividend obligation allows Agree Realty to retain the capital necessary to keep adding to its property portfolio. This is why the company expects to execute $1.5 billion to $1.7 billion in acquisitions in 2022. Second, the moderate dividend payout ratio builds in a buffer for the REIT to maintain its dividend in environments with challenging economic conditions.
Agree Realty is trading at a trailing-12-month price to adjusted funds from operations (AFFO) per share ratio of 20.4. This isn't a bargain-bin valuation, but it's also not expensive for a REIT of its quality.
2. Main Street Capital
Main Street Capital (MAIN 0.41%) is a business development company (BDC). In exchange for an ownership stake or above-average interest rates, the company and its BDC peers provide capital to business that have limited avenues of receiving funding.
BDCs have a tax structure that is similar to REITs. BDCs are required to distribute at least 90% of their taxable income to shareholders through dividends. This allows them to bypass taxation at the corporate level. And it explains how Main Street Capital yields a generous 5.9%, which is nearly quadruple the S&P 500 index's 1.5% dividend yield.
The company just raised its monthly dividend per share by 2.3% to $0.22. Including its $0.075 per share special dividend paid in the first quarter, Main Street Capital's dividend payout ratio was manageable at 92.2% for the quarter. This should give the company flexibility to continue raising its dividend.
And Main Street Capital's dividend is also protected by the fact that its portfolio is invested in 190 companies throughout dozens of industries. This is what makes the stock a reliable pick for income investors.
