These 4 Anti-Inflation Stocks Pay Monthly Dividends
There are many stocks that pay dividends monthly, and investors might be interested in those that offer annual returns in line with the inflation rate of around 7%.
Let’s take a look at four real estate investments from the list that meet this tempting threshold: Armor Residential REIT (NYSE:ARR), Broadmark real estate capital (NYSE: BRMK), Ellington Financial (NYSE: EFC)and Gladstone Commercial (NASDAQ: GOOD).
All four are real estate investment trusts (REITs), a business structure that includes an obligation to pay out at least 90% of taxable income in the form of dividends to shareholders. Three are mortgage REITs (mREITs), meaning they invest in mortgage assets rather than the properties themselves. The fourth, Gladstone, operates a diversified portfolio of industrial and office buildings.
The graph below shows the five-year dividend yield of each of these REITs, as well as that of the Vanguard S&P 500 ETFan exchange-traded fund that tracks stocks on the S&P500, to compare. Note the dramatic surge in yields in 2020. This is when stock prices plunged in the early months of the pandemic, and these REITs continued to pay dividends.
1. Armor Residential REIT
Armor Residential REIT buys and sells residential mortgage-backed securities, including those issued or guaranteed by the federal government by Fannie Mae, Freddie Macand Ginnie Mae.
Based in Vero Beach, Florida, this mREIT has been in operation since 2008. It now pays a monthly dividend of $0.10 per share, giving it a high annual yield of around 14% at a price of 8.56 $ per share, or about 32% off its 52-week high of $12.56.
A payout ratio of 120% based on 2022 earnings estimates could be cause for concern and worth watching, but this stock hasn’t missed monthly dividend payouts since it started paying them. pour in January 2011, so there is some experience and stability here.
2. Broadmark Real Estate Capital
Broadmark Realty Capital specializes in short-term loans and first deeds of trust to builders, developers and investors in residential and commercial properties.
The Seattle-based company was founded in 2010 and went public in 2019 through a SPAC merger. It now pays a monthly dividend of $0.07 per share, giving it a healthy annual yield of around 9.8% at a price of $8.59 per share, around 22% from its 52-week high. of $11.10.
A payout ratio of around 102% based on 2022 earnings estimates could be a cause for concern here too, but the company’s construction portfolio has held up well enough during the pandemic so far to avoid the downsides. dividend cuts and should provide stability and even share growth. opportunities as construction activity improves.
3. Ellington Financial
Ellington Financial is a hybrid MREIT that invests in loan origination businesses, personal and business loans, and residential and commercial mortgages.
This Old Greenwich, Connecticut-based REIT was founded in 2007. It now pays a monthly dividend of $0.15 per share, giving it an attractive annual yield of around 10% at a price of 18.11 $ per share, or about 7.6% off its 52-week high of $19.60.
The company cites its ability to shift allocation between different asset classes as reason to be confident in its stability going forward, and its payout ratio of 91.37% based on 2022 earnings estimates is reasonably modest for an mREIT.
4. Commercial Gladstone
Unlike the other members of this quartet, Gladstone Commercial directly buys, owns and operates real estate. It has a portfolio of 129 net leased industrial and office properties in 27 states.
Based in McLean, Va., the company was founded in 2003. It now pays a monthly dividend of $0.1254 per share, giving it an annual yield of around 7% at a price of $21.85 per share. share, up about 16% from its 52-week high of $26.13.
A payout ratio of 88.76% based on 2022 earnings estimates seems reasonable given the company’s 97% occupancy rate and its ability to secure long-term leases with high-quality tenants . To cite just one example, the 15-year pact he has just signed with CVG Management Corp. for the auto supplier’s office building near the site of the $20 billion chip-making plant that Intel just announced near Columbus, Ohio.
Balancing risk and reward
Gladstone’s yield is not as high as the mREITs discussed here, but still respectable for an equity REIT. Like all mREITs, other members of this group use interest rate spreads and leveraged debt to earn their money, and these times can be particularly volatile for this type of investment right now.
That doesn’t mean they can’t be profitable investments that provide solid monthly income. But if you go this route, you need to stay alert and be prepared to move your money elsewhere if you’re not comfortable with that volatility, especially if there’s a dividend cut.
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