Is there anyone who doesn't enjoy earning income on their investments each quarter for no work in exchange (besides the recommended occasional portfolio monitoring)? Probably not. That's what makes dividend stocks so appealing.
The only thing that could be better is income from your investments every month, right? Here are two stocks to consider buying that send a monthly dividend check to their shareholders.
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1. Stag Industrial: Business is booming
Owning nearly 600 properties spanning over 100 million square feet throughout the U.S., Stag Industrial (STAG 2.23%) is among the largest industrial real estate investment trusts (REITs) in the investment universe. The company's success lies in its ability to build win-win propositions for both its clients and itself.
NYSE: STAG
Key Data Points
Stag Industrial specializes in buying commercial industrial properties from businesses, which are often leased back to those very same businesses. This is enticing to clients because they aren't limited in how they can use capital proceeds to benefit their business, whether for debt reduction or further growth. Stag Industrial comes away a winner through roughly five-year weighted-average lease terms with rent increases built into the contracts, which leads to steadily growing rent revenue.
A thriving e-commerce industry and other trends, like reshoring and near-shoring, are driving unprecedented demand for commercial industrial real estate. That helped Stag Industrial generate record same-store net-operating income growth of 5.9% in the first quarter of 2023. Due to such remarkable operating performance in recent quarters, it's not unreasonable to expect decent core funds from operations (FFO) per share growth from the company over the next few years.
Around the middle of each month, Stag Industrial pays a dividend to its shareholders. Compared to the S&P 500 index's 1.6% dividend yield, the stock's 4% yield makes up for its marginal dividend growth in recent years. And with the dividend payout ratio set to clock in at 65% in 2023, investors can rest assured the dividend is well covered. Investors can pick up shares of Stag Industrial at a current-year core FFO per-share ratio of just over 16, a decent value for the company's fundamentals.
2. Main Street Capital: A steady Eddie
In the world of business development companies (BDCs), few are as reliable as Main Street Capital (MAIN 1.15%): Since the fourth quarter of 2007 (the first quarter after going public), the company's monthly dividends per share have soared by 109% to $0.23 in the third quarter of 2023.
NYSE: MAIN
Key Data Points
This level of dividend growth is especially attractive when considering Main Street Capital's dividend yield is a whopping 6.9% -- not counting special dividends, either. Like Stag Industrial, the company's regular dividends are paid in the middle of each month. Special dividends are typically paid in the last few days of the quarter.
Dividend growth is poised to continue for Main Street Capital for three reasons. For one, the company's multibillion-dollar investment portfolio is diversified across hundreds of businesses in dozens of industries, shielding Main Street Capital from a downturn in any one industry. Second, the BDC is capitalizing on a growing investment spread between the fixed interest rates it pays on debt and the variable interest rates received from debt investments. Finally, Main Street Capital's distributable net investment income per share in the past four quarters was nearly 40% above its dividends paid. That builds a big buffer into its dividend payments.
Investors seeking huge dividends will be happy to find out that Main Street Capital looks undervalued: The stock's price-to-book ratio of 1.5 is slightly below its 10-year median P/B ratio of 1.6, making it an interesting buy right now.
