Not all stocks pay dividends, but those that do typically distribute them once each quarter. However, a small percentage of stocks pay dividends on a monthly basis.
If you are an income investor who would appreciate the option of getting payouts more frequently than four times a year, you may want to consider stocks that cut you a monthly paycheck. Here are two good options.
1. Realty Income
Realty Income (O -0.17%) is built to deliver dividends; in fact, it has trademarked the phrase "The Monthly Dividend Company" for use in its marketing. You can't get much more explicit than that. As a real estate investment trust (REIT), its tax structure requires that the company distribute at least 90% of its taxable income via dividends to shareholders.
There are many different types of REITs, but Realty Income specializes in single-unit commercial properties that it rents out under long-term leases. It has some 12,400 properties, 1,259 clients across 84 industries, and a 99% occupancy rate, so it has been able to generate steady, consistent income.
REITs in general are usually good dividend stocks. But few of them can match Realty Income for their consistency and dedication to the dividend.
This company has increased its payouts every year since it went public in 1994. On a monthly basis, it delivered 121 dividend hikes over that period, with the latest coming on June 30, when it boosted its monthly dividend to $0.2555 per share from $0.2550 per share.
On an annual basis, that comes out to approximately $3.07 per share, giving it a yield at the current share price of 4.9%. That yield may not be as high as some other REITs offer, but Realty Income's payout is more consistent than most. It also typically generates a higher share price growth than its peers, averaging about 3.7% annually over the past 10 years (as of July 27). That's not a lot of return compared to most stocks, but for REITs, which are designed to deliver most of their rewards to shareholders via dividends, it's pretty good. And if you reinvested your dividends, your annualized total returns over the past 10 years would have been 8.8%.
2. AGNC Investment
AGNC Investment (AGNC 0.97%) is a mortgage REIT that focuses on government agency mortgages such as those guaranteed by Fannie Mae and Freddie Mac. Unlike Realty Income, which owns properties, AGNC owns a portfolio of mostly agency-backed mortgages and earns interest on them. These types of mortgages, backed by the federal government, are typically less risky than other types of mortgages, but the housing market has been in a slump for more than a year now, so AGNC has struggled.
However, it has maintained its $0.12 per share monthly dividend. The stock is currently trading at about $10.50 per share and is up about 2% year to date. As its stock price has ticked up, its dividend yield has ticked down to about 13.7% -- which is down from more than 15% in May and nearly 17% last fall. That's still a massive yield, and higher than its long-term average.
When AGNC's yield rose too high in the past, or the market struggled, it had to cut its dividend, which it did in March 2020, May 2019, and August 2016. As a stock's yield is the percentage of its payout relative to its share price, the lower the share price falls, the higher the yield rises -- if the payout stays the same. But when a stock's price drops significantly, it typically means the company is struggling, so its previous payout levels could be unsustainable.
While the housing market isn't expected to improve much anytime soon, it shouldn't get any worse, as this interest rate tightening cycle is near its end. So one might reasonably expect AGNC to be able to continue to maintain its dividend in the near term, barring any unexpected economic shocks. And at this high yield, it makes for an excellent income stock.
Of these two monthly dividend payers, AGNC has the higher yield, but Realty Income is steadier and more reliable with a higher average annual return. If I had to choose one, it would be Realty Income.
