3 stocks that write you a check every month
Nothing like regular dividends to encourage investors. It’s one thing to get paid quarterly, but getting paid monthly is even better, especially if the return is over 4%.
Monthly dividend stocks are often real estate investment trusts (REITs) or business development corporations (BDCs), which tend to be diversified investments. Instead of relying on sales of one or two successful products, they usually have multiple sources of income from multiple companies.
Three monthly payers that I love right now because of their stock growth and high dividend yields are Gladstone Investment (NASDAQ: GAIN), Industrial STAG (NYSE: STAG), and Real estate income (NYSE: O).
Hard to lose with an acronym like GAIN
Gladstone Investment shares have risen over 59% in the past 12 months and over 23% since the start of the year. The company increased its monthly dividend from 2.94% in January 2020 to $ 0.07 per share, giving it a yield of 6.71% at its closing price on Thursday. It has distributed a dividend for 186 consecutive months and has not reduced its dividend since 2009.
BDCs like Gladstone provide management assistance and provide short-term loans of $ 20 million to $ 50 million to their clients. Gladstone said his clients are mostly small businesses with a EBITDA between $ 3 and $ 20 million.
Like REITs, BDCs can avoid income tax by distributing 90% of their taxable income to shareholders, which is the main reason their dividends are so good. The downside is that they have to raise capital in the debt and equity markets, which means they may have a hard time raising capital during a prolonged downturn, making them riskier than stocks. classic.
Gladstone focused on a diverse customer base, helping to mitigate some of this risk. As of December 31, it invested in 28 companies in 17 states and 13 industries.
BDCs can be difficult to analyze, but for me the best show steady growth in tangible book value, the value of a company’s total net assets minus the intangibles. Over the past five years, Gladstone’s has increased 23.82% while its total return price has increased 176.8%.
Stag Industrial is growing the right way
STAG Industrial is a REIT specializing in industrial commercial real estate. Its shares have risen over 56% in the past 12 months and over 10% in the past year. the the company offers a monthly dividend of $ 0.120833 per share, which equates to $ 1.45 per share per year, giving it a current yield of 4.2%.
The quality of STAG tenants, who understand Amazon, General Service Administration, and Ford, among other things, makes it a safer choice. The company said in a recent report that more than 60% of its tenants have annual revenue above $ 1 billion.
In the fourth quarter, STAG reported that its buildings had an occupancy rate of 96.9% on the total portfolio and 97.2% on the operating portfolio. As of February 10, he had received rent from 99.6% of these buildings for the year ending December 31, 2020.
The company has a lot of momentum behind it. It showed net profit of $ 196.7 million for 2020, a 349% year-over-year increase. The company’s baseline FFO was $ 288.7 million, up 21.6% year-over-year. Much of the property owned by STAG is in warehouses, and the growth of e-commerce has made warehouses a fashionable commodity. According to statistics from the US Census Bureau, e-commerce sales amounted to $ 791.7 billion in 2020, an increase of 32.4% from the previous year. And the e-commerce percentage of retail sales rose to 14% last year, up 3% from the previous year.
Over the past five years, STAG has increased its Total Return Price by 121.9% while increasing its Funds From Operations (FFO) per share by 99.77%.
Realty Income is built to last
No monthly dividend portfolio is complete without the aptly named Realty Income, which has joined the S&P 500 Dividend Aristocrat list in 2020. Realty has delivered a dividend for 607 consecutive months and has increased that dividend for 93 consecutive quarters.
The company’s shares have risen over 42% in the past 12 months and over 4.7% this year. The REIT just increased its monthly dividend to $ 0.235 per share, which represents an annual dividend of $ 2.82 per share and a current yield of 4.33%. This is a business designed for long term investors. If you had invested in the company when it was first listed on the New York Stock Exchange in 1994, you would have an average compound annual return of 15.3%, which compares favorably to S&P 500 average of 10.4% or the Nasdaq Composite average of 11.4% during this period.
Realty Income is large and diverse, with over 6,500 properties holding long term leases and tenants such as Alliance of Walgreen boots, FedEx, Walmart, CVS Health, and General dollar, all of which have a high credit rating. While some of them have faced financial hardship due to the pandemic, Realty Income continues to get paid. It collected contractual rents at the rate of 93.6% in the fourth quarter.
The company has been increasing its adjusted FFO per share for a decade. Last year it was $ 3.39 per share, up from $ 3.32 in 2019.
You don’t have to choose one
There is no reason that investors cannot have these three eggs in their basket. Realty Income is the easier choice because of its reliability and because it should fare better this year as businesses open up. STAG Industrial was able to profit from the explosion of e-commerce last year, and although e-commerce is not growing at the same rate this year, this trend is not declining. It’s also a good bet because of its diverse and elitist tenant base. Gladstone Investment carries more risk than the two REITs, but will also reward investors with a higher dividend yield.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.