Most income stocks distribute dividends on a quarterly basis, but a select group of stocks instead opted to distribute payouts on a monthly basis. When it comes to things like compounding interest and dividend reinvestment, this gives the recipients of monthly distributions an edge. It also can make budgeting easier for those that rely on the payouts as income.
Let's take a closer look at two excellent dividend stocks that cut you a check each month: Realty Income (O 0.15%) and Agree Realty (ADC -0.41%). Both are real estate investment trusts (REITs), so they are required by federal statute to pay out 90% of their taxable income in dividends. Each is developing an excellent track record of rewarding shareholders.
1. Realty Income
Realty Income is a REIT that tells you in its tagline exactly what it is -- the "Monthly Dividend Company." Along with building a reputation for monthly payouts, its also building a reputation for regularly increasing its payout amount. With 28 straight years of annual dividend increases, it's earned the title of Dividend Aristocrat. Since it went public in 1994, Realty Income has increased its dividend 117 times (an average of four increases a year).
As a REIT, it owns a portfolio that includes 11,400 commercial real estate properties that it earns money on through long-term net lease agreements. It has more than 1,100 commercial clients in 72 different industries. Most of the properties are leased to retail and industrial clients that either have a service, a non-discretionary focus, or a low-price-point component to their business, which allows them to operate in a variety of economic environments and compete with e-commerce retailers. Chipotle, 7-Eleven, Walgreens, and Lowe's are just some of its clients.
In October, Realty Income declared a monthly dividend for November of $0.248, which is the same as September but up 5.1% from November of 2021. For the year, it is expected to have an annual payout of $2.97 per share at a yield of 4.78%. If you owned 50 shares, you would have approximately $148 in annual income to keep or reinvest.
The share price is down about 14% year to date and has returned about 4.8% on an annualized basis over the past 10 years as of Nov. 2. But its value is as a dividend stock, and that should remain, as its mission is to generate income for investors. It continues to add to its portfolio as it made $6.4 billion in acquisitions in 2021, all sourced based on its time-tested strategy; it acquired VEREIT, a competing single-tenant commercial REIT. In the most recent quarter, it acquired 237 properties worth $1.7 billion.
It has a steady stream of cash coming from its monthly leases and its cash flow, as measured by adjusted funds from operations per share, which increased by 10.2% in the second quarter. And there is plenty of room to run with an addressable market of $12 trillion in single-tenant net-lease real estate.
2. Agree Realty
Another rock-solid monthly dividend stock is Agree Realty, a REIT that owns mostly retail properties, with a focus on leasing to retailers that are resistant to economic downturns or disruptions from e-commerce retailers. It owns a portfolio of more than 1,700 properties across 48 states, with single-use tenant clients like Hobby Lobby, Circle K, CVS, and Bridgestone Firestone, to name a few.
The stock outperformed the market this year, down about 5% year to date as of Nov. 2. Over the past 10 years, it has posted an annualized return of 10.2% as of Nov. 2, which is nearly on par with the S&P 500, which has returned 10.4% annually over that span.
Like Realty Income, it generates a steady monthly cash flow that has enabled it to support its dividend for so long. The stock is not a Dividend Aristocrat, but it has increased its dividend annually for the past nine years. However, it didn't switch to a monthly dividend until January 2021.
In October of this year, it raised its monthly per-share payout to $0.24, which is 5.7% higher than it was the previous October. The annual payout per share is expected to be roughly $2.88 at a yield of 4.2%. If you owned 50 shares, you would have about $144 in annual dividend income.
It continues to grow as well, as it invested in 121 retail net lease properties in the third quarter worth $372 million. Also, its adjusted funds from operations per share grew 7.8% year over year in the quarter. At the end of the third quarter, the portfolio was 99.7%, with an average remaining lease term of approximately 8.9 years. Further, investment-grade retailers represented 67.5% of rents.
Also, the company raised its range for acquisition volume for 2022 to $1.6 billion to $1.7 billion, up from the previous range of $1.5 billion to $1.7 billion. That would be up from a record $1.43 billion in 2021.
These stocks are built to produce dividends, given their tax requirements to do so as a REIT. And given their track records of success in various market cycles, they are great options for those looking for reliable monthly dividends.
