Since most dividend stocks pay quarterly, those relying on dividends to cover their recurring expenses may face challenges. Managing your cash flow well or investing in stocks with staggered payment schedules can help overcome this hurdle.
A simpler strategy is to invest in stocks that pay monthly dividends. Realty Income (O +0.27%), Main Street Capital (MAIN +1.19%), and Stag Industrial (STAG +0.23%) stand out among this group for their attractive and reliable monthly dividends, as well as their strong financial profiles. These factors make them ideal dividend stocks to buy right now for passive income.
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1. The Monthly Dividend Stock
Realty Income has become known as The Monthly Dividend Stock. The real estate investment trust's (REIT) goal is to pay dependable monthly dividends that steadily increase. It has certainly delivered on that mission over the years.
The diversified REIT has declared 662 monthly dividends since its founding in 1969, with its payment increasing 131 times since its public market listing in 1994. Realty Income has raised its dividend for 111 straight quarters and more than 30 consecutive years.
NYSE: O
Key Data Points
Realty Income's monthly dividend currently yields 5.5%, several times higher than the S&P 500's (^GSPC 0.16%) 1.2% yield. The REIT supports this payout with a high-quality real estate portfolio and a strong financial profile. It owns over 15,600 retail, industrial, gaming, and other properties secured by long-term net leases with many of the world's leading companies. These properties produce very durable rental income.
Realty Income pays out a conservative percentage of its cash flow in dividends (about 75% of its adjusted FFO), retaining the rest to fund new income-generating investments. The company also boasts having one of the 10 best balance sheets in the REIT sector. Realty Income's elite financial profile enables it to continue expanding its portfolio and monthly dividend.
2. A bankable monthly dividend, plus a little extra each quarter
Main Street Capital has a rather unique dividend policy. The business development company (BDC) pays a monthly dividend set at a very conservative level. That allows it to provide investors with sustainable, recurring monthly income that grows over time. The company has increased its payment by 132% since its initial public offering in 2007, with no dividend suspensions or reductions.
NYSE: MAIN
Key Data Points
Additionally, Main Street Capital periodically pays supplemental quarterly dividends from its excess income. This two-part dividend policy enables Main Street Capital to provide its investors with a durable monthly income stream while also remaining compliant with IRS regulations for a BDC that require it to distribute at least 90% of its taxable income to investors via dividends. Over the past quarter, Main Street Capital has paid $1.065 per share in dividends, resulting in a 6.6% annualized yield at its current share price.
Main Street provides debt and equity capital to lower-middle-market companies ($10 million-$150 million in annual revenue) and loans to middle-market companies (over $150 million in revenue). These debt investments tend to generate high income yields in the low double digits, providing it with recurring cash flow to support its dividend payments.
3. A steady income stock
Stag Industrial is a REIT focused on owning industrial real estate secured by long-term leases. These properties produce durable and steadily rising rental income. Its long-term leases escalate rents at a low-single-digit annual rate (currently around 2.9%). Meanwhile, with market rents growing even faster due to robust demand, Stag Industrial can often sign new leases at even higher rates as legacy contracts expire (24% average rental increase in 2024).
NYSE: STAG
Key Data Points
With a strong financial profile, the industrial REIT maintains the flexibility to acquire additional income-generating properties. Each year, Stag Industrial invests several hundred million dollars in expanding its portfolio. Value-add investment opportunities, such as vacant properties or those with expansion potential, are a primary focus because they typically earn higher returns than stabilized property acquisitions.
Stag Industrial's steadily rising income enables it to grow the dividend. The REIT has raised its payment every year since it went public in 2011.
Top-notch passive income stocks
Realty Income, Main Street Capital, and Stag Industrial offer high-yielding, steadily growing monthly dividends backed by strong financials. Their reliable and increasing payouts make them standout choices for anyone seeking consistently rising passive income.
