You’re not alone if you’re an investor who’s insistent on being paid monthly dividends rather than quarterly dividends. Indeed, a number of companies have shifted gears from paying dividends every three months to every month. At the end of the day, it’s a small change that makes a big difference for income investors, especially those who are retired and living off a fixed income.
Of course, if you’re keen on a monthly dividend payer, you’ll be reducing your pool of potential buys significantly. And that’s not always the best way to go if you’re looking for the best value out there. In any case, this piece will check out two interesting stocks that have durable payouts and attractive valuation metrics that just so happen to pay dividends every month.
Who knows? If demand for monthly dividends rises from here, perhaps more firms will be inclined to make the change to better appeal to passive income investors. Of course, paying out dividends 12 times per year adds to the administrative paperwork that could have otherwise been avoided had investors been more patient. Either way, it’s up for debate as to whether it really is better for stalwarts to pay dividends monthly over quarterly.
Let’s check in on two names that will pay every month that are looking quite interesting going into the start of summer.
Key Points
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Realty Income and Main Street Capital are two monthly dividend payers worth watching or buying today.
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The payouts of both firms appear safe and well-covered by cash flows.
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Realty Income
Realty Income (NYSE:O) is perhaps the best-known monthly dividend payer. It’s also one of the pioneers of paying monthly rather than quarterly. The company hasn’t missed a monthly payment in a very, very long time. And it’s grown its payout significantly over the decades. Today, the stock yields 5.6%, which is quite generous, especially after gaining more than 10% year to date.
Sure, the opportunity to snag O stock with a yield at around 6% during the post-Liberation Day sell-off has come and gone, but shares still look appealing for the passive income crowd out there, especially coming off a decent first-quarter earnings number that included reaffirmed full-year guidance.
The retail-centric REIT (real estate investment trust) also bought more than $1 billion worth of acquisitions, effectively taking advantage of opportunities in the space at a time of industry wobbiness. With a strong balance sheet, a focused management team that can unlock value via M&A, and a monthly payout, there’s a lot to love about the name, especially for those calling for rate cuts in the near future.
Main Street Capital
Main Street Capital (NYSE:MAIN) is another monthly dividend payer that’s looking interesting going into July. Shares yield a far richer 7.4% at the time of writing. And while Victor Bonilla of Jehoshaphat Research, who’s short the stock, sees a dividend cut on the horizon, I wouldn’t be too quick to jump to conclusions, especially as the stock recovers from the short pitch delivered at the widely-publicized Sohn Investment Conference.
Is the payout quite sizeable? Most definitely. But is it at risk of a big cut amid industry challenges? I wouldn’t count on it happening anytime soon. A stretched payout doesn’t necessarily mean a cut looms. The latest quarter showed some fairly healthy cash flows. If more of the same is on the horizon for the investment firm, a dividend hike seems likelier than a cut, at least in my opinion. For now, investors can expect to collect monthly, as usual.
The bottom line
Realty Income and Main Street Capital aren’t the only monthly payers, but they’re among the most compelling at this juncture. For investors who can take advantage of dips, I do find the following to be among the top monthly payers to stash on a watchlist in late June. Given its lengthy track record of paying monthly, I’m inclined to prefer O over MAIN, especially given question marks surrounding Main Street’s short-seller.
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