Dividends are obviously a great choice for income-seeking investors. If you need this income to pay your bills though — or just want the flexibility that comes with receiving the income you’re due sooner than you’re getting most of it right now — the average dividend stocks’ quarterly cadence of payments isn’t exactly convenient.
Fortunately, you’ve got options. Not a lot of them. But if you’re willing to look a bit “outside the box,” a handful of dividend stocks with yields of more than 5% dish out their dividends on a monthly rather than a quarterly basis. Here’s a closer look at three of the best of these names right now.
Realty Income
It’s likely you’ve stepped foot onto a property owned by Realty Income (O +0.02%) without even realizing it. See, this real estate investment trust — or REIT — owns a bunch of land and buildings where familiar retailers, including Dollar General, 7-Eleven, Walgreens, and Home Depot, are currently operating. It’s got 15,588 different brick-and-mortar storefronts to rent out, in fact, 98.8% of which were occupied as of June. It’s a testament to how well its business is managed and the caliber of its tenants.
The real selling point here, however, is the unwavering growth of its monthly dividend. Not only has Realty Income paid one like clockwork since 1969; it has now upped its annual payout for 31 consecutive years. Indeed, it has raised its monthly per-share payment for 116 consecutive quarters, meaning shareholders’ monthly dividends get a bit bigger every three months.
Today’s Change
(0.02%) $0.01
Current Price
$54.18
Key Data Points
Market Cap
Day’s Range
$53.83 – $54.31
52wk Range
$53.15 – $67.94
Volume
5M
Avg Vol
6.5M
Gross Margin
50.82%
Dividend Yield
5.99%
The kicker: While it’s still mostly a retail REIT, Realty Income is also easing into the data center business. This industry is well-suited to the tax advantages of the real estate investment trust structure, as it generates recurring monthly cash flows from companies renting access to a data center’s servers.
There’s not a ton of capital growth to be gleaned here, for the record; it’s first and foremost an income holding. But that’s ok. With a forward-looking yield of 6.1% that’s based on a dividend that’s outgrown inflation since 1994, it’s still a fantastic holding for income-oriented investors.
UDR
Investors familiar with apartment complex owner UDR (UDR +1.64%) may not recall that it also pays a monthly dividend. That’s because until July of this year, it wasn’t. Recognizing that it could better serve shareholders by making more frequent (even if smaller) payments, UDR switched from quarterly payouts to better align with investors’ preferences.
This switch didn’t actually alter this ticker’s dividend yield, though, which currently stands at 5.2% on a forward-looking basis. Prior to July, the company had raised its full-year payments for 16 consecutive years.
As noted, UDR owns apartment buildings and rents to approximately 60,000 tenants across 21 U.S. markets, making it a much more conventional REIT than Realty Income. And this is no small detail. As long as REITs pass the majority of their rent-based profits through to their shareholders, they’re not taxed at the corporate level. This ultimately means more risk-adjusted earnings end up in investors’ hands.
Image source: Getty Images.
Perhaps more important right now and for the foreseeable future, in light of the nation’s overall housing shortage and the pricing power that apartment complex owners subsequently enjoy, rental housing is a fantastic business to be in. That’s especially true given that the rest of the stock market may be due for a period of underperformance.
iShares Preferred and Income Securities ETF
Finally, add the iShares Preferred and Income Securities ETF (PFF +0.03%) to your list of monthly dividend payers to own right now, with a trailing 12-month yield of 5.4%.
Preferred stocks may be one of the market’s best-kept income-generating secrets. They’re not legal, debt-based obligations like bonds, nor are they common stocks. Rather, they’re something in between, boasting dividends prioritized over a company’s common stock dividend payments. Although preferred stock dividends aren’t outright guaranteed, they usually offer a specific (albeit fixed) percentage-based payment in perpetuity. Many preferred stocks also guarantee back payment — in the event of missed payments — before the underlying company is allowed to make any payment to owners of its common stock.
Their chief challenge? Finding and tracking preferred stocks isn’t nearly as easy as it is with more conventional equity tickers.
Not that there’s much price volatility with them (like bonds, their prices tend to ebb and flow modestly in response to changing interest rates), but even if you can figure out which one is which in the first place — companies that issue preferred stock often have several different variants issued and outstanding — you may or may not get accurate or timely pricing data for these income investments. Most preferred stocks also only make quarterly payments.
The iShares Preferred and Income Securities ETF solves all of these problems though, in addition to offering instantaneous diversification within this sliver of equities that isn’t exactly easy to navigate.
Just understand there’s no capital growth with preferred stocks. They simply exist until and unless the company repurchases them or requires their owners to convert them into common shares. This is why preferred shares tend to offer higher yields than common stock as a means of offsetting their lack of growth potential.
