Dividend stocks are a popular way for investors to generate income, especially retired investors who need reliable cash flow. While most dividends are paid on a quarterly basis, some companies make their payouts on a monthly basis, and many investors welcome the higher frequency, in part because it can help them structure their own budgets more effectively.
One of the best parts of dividend stocks is the pleasure of watching your payout get deposited into your investment account without you having to lift a finger: true passive income. And with monthly dividend shares, you can experience that joy twelve times a year instead of just the usual four times.
Here are seven top monthly dividend stocks, an often overlooked source of monthly dividends and what to look for when looking for monthly dividend stocks.
7 Best Monthly Dividend Stocks
We looked at the relatively small number of companies that pay monthly dividends and selected some of the best that had the following characteristics (data as of April 9, 2024):
- Traded on US exchanges, for easy accessibility
- Market capitalization of over $1 billion, providing some financial stability
- No business development companies (BDC), a risky segment that often pays monthly dividends
Monthly dividends are especially popular with real estate investment trusts (REITs) because these companies are required by law to pay out substantial dividends and they have business models with recurring income (rents) that help support reliable cash flow.
1. Real estate income (O)
Realty Income is a REIT whose identity is based on monthly dividends, as it calls itself “The Monthly Dividend Company.” This company owns single-unit commercial properties that it leases to high-quality tenants for long-term terms, typically more than ten years.
- Market capitalization: $46.6 billion
- Yield: 5.8 percent
2. SL Green (SLG)
You may not know the name, but SL Green is the REIT behind many Big Apple offices. In fact, the company bills itself as “the largest owner of office real estate in New York City.” Despite concerns about employees continuing to work from home, New York City remains a top market for this type of real estate.
- Market capitalization: $3.6 billion
- Yield: 5.6 percent
3. STAG Industrial (STAG)
This REIT focuses on industrial properties and warehouses, niches that have performed well during the rise of e-commerce, especially since the arrival of COVID. STAG is performing strongly and expects to grow significantly in the coming years as e-commerce continues to rise.
- Market capitalization: $7.1 billion
- Yield: 3.9 percent
4. AGNC Investments (AGNC)
AGNC Investment is a REIT, but of a specific type called a mortgage REIT, which holds mortgages on real estate rather than the properties themselves. In the case of this REIT, it buys safer agency-backed residential mortgages. The company has been listed on the stock exchange for more than fifteen years and has paid significant dividends, although the dividend fluctuates depending on the economic environment.
- Market capitalization: $6.8 billion
- Yield: 14.8 percent
5. Apple Hospitality REIT (APLE)
This lodging REIT operates more than 200 hotels under some of the industry’s most recognized brands, including Marriott, Hilton and Hyatt. Although Apple, like many of its competitors, was hit hard by the pandemic and had to cut its dividend, it is now back to making monthly payouts.
- Market capitalization: $3.9 billion
- Yield: 5.8 percent
6. EPR properties (EPR)
EPR calls itself an experiential REIT, and that’s because it focuses on properties where consumers can enjoy themselves, such as movie theaters, ski resorts, and other cultural venues. It has been investing in experiential properties for more than two decades, and while it also had to cut its dividend during the pandemic, it is now back to making monthly payouts.
- Market capitalization: $3.2 billion
- Yield: 7.9 percent
7. Real Estate Agreement (ADC)
Agree is another name behind the name: it owns more than 1,500 properties that it leases to well-known retail companies, such as Advance Auto Parts, PetSmart, AutoZone and many more. This REIT converted to a monthly payout schedule in 2023, but has been public since 1994.
- Market capitalization: $5.9 billion
- Yield: 5.2 percent
Check out closed-end funds for monthly dividends
The number of monthly dividend-paying stocks is limited, and if you really want a monthly dividend stream, you’ll have to buy a lot of them, otherwise you’ll still largely have regular quarterly dividends. But you also don’t want to put all your money into one or two monthly dividend payers, because you’re putting yourself at significant risk for the modest benefit of that monthly payout.
But investors do have one option if they’re looking for a diversified fund that pays out monthly: closed-end funds (CEFs). These funds are collections of stocks and bonds, and offer some diversification in their investments, reducing their risk.
It’s also useful to know that CEFs take on significant debt to make their investments, meaning they can fluctuate widely when the market becomes volatile. If they have to reduce their debt in difficult times, this means that they also have to reduce their payout.
Finally, it’s worth noting that smart investors typically only buy CEFs if they are trading below intrinsic value, which is the price of all their assets minus their liabilities. This practice builds a margin of safety into the investment, protecting investors, but it does not guarantee safety.
What dividend investors should pay attention to
Monthly dividends can be attractive, but don’t be blinded by the prospect of a regular monthly payout and forget that the underlying business still needs to thrive. When assessing your monthly dividend stocks, consider the following things (including some secrets to successful dividend investing):
- Sustainability of the dividend: Dividend sustainability is one of the most important things to consider, no matter how often your company makes a payout. If a company cuts its payout, the stock can plummet quickly. There’s little point in buying a stock for its 5 percent dividend, only to have it drop by 20 percent if the payout has to be reduced or eliminated.
- Resilient business model: A company with a resilient business model will thrive in good times and not underperform in bad times, giving it more resources to pay its dividend and ideally grow it over time. Furthermore, a resilient business model ensures that the company doesn’t have to cut its payouts when times get tough.
- High recurring cash flows: A company with a high recurring cash flow, such as a subscription company or a real estate company, has greater stability, allowing it to pay dividends safely.
These are three issues that dividend investors should pay particular attention to, but they come in addition to other issues you need to analyze when investing in individual stocks. However, these issues are less relevant if you’re buying the best dividend ETFs.
And those looking for sustainable dividend stocks of any kind (not just monthly payers) should investigate the Dividend Aristocrats, who have an enviable track record of returns.
In short
It can be nice to get paid monthly from your investments, but it’s crucial to remember that dividend sustainability is more important than how often you get paid. After all, you can divide the typical quarterly dividend into three parts and pay yourself every month. So focus on finding companies that have a strong track record of paying – and ideally – increasing their payouts.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.
