The Best Stocks For Monthly Dividends

The vast majority of stocks that distribute dividends pay them out on a quarterly basis, but there are some that issue them monthly. Monthly dividend payers are often a favorite among income investors or those in retirement who appreciate the more frequent payouts.

Typically, most of them are real estate investment trusts, or REITs, which are required by federal statute to distribute 90% of their taxable income to investors through dividends in exchange for certain tax benefits. Thus, REITs are among the best and most reliable dividend payers. Here are the two best REIT stocks for monthly dividends.

1. Realty Income

Realty Income (NYSE:O) owns a portfolio of commercial real estate properties that it leases out to tenants, mostly in long-term agreements. It currently leases out some 13,250 properties, and most of the taxable income it earns goes toward its dividend.

In fact, the company prides itself on its dividend and even calls itself “The Monthly Dividend Company.” However, this is not just a marketing slogan, as Realty Income has increased its dividend for 30 consecutive years, making it a Dividend Aristocrat.

Realty Income currently pays out a high yield of 5.32%, which is among the best on the list of Dividend Aristocrats. This month, it increased its monthly dividend for the 123rd time since going public in 1994.

The dividend, which is payable on Jan. 2, jumped to 25.65 cents per share, up from 25.6 cents per share the previous month. Over the course of 12 months, Realty Income has paid out a dividend of $3.07 per share. Thus, if you owned 100 shares at $57 per share, you would have received $307 in dividends, or about $26 per month.

As far as its returns, they are going to be cyclical, based on the real estate market. However, Realty Income is more stable than most because a lot of its clients are single-tenant national chains like Lowe’s, 7-Eleven, Chipotle Mexican Grill and others with long-term agreements.

Over time, the REIT has generated solid returns, especially if you include the dividend. Since it debuted in 1994, Realty Income has posted an average annual return of 7.1%, but when you look at the total return including the dividend, it averages about 14% per year.

2. Stag Industrial

Stag Industrial (NYSE:STAG) is another REIT that pays out a monthly dividend. It operates in a different arena than Realty Income, as it owns and leases single-tenant industrial properties. It owns roughly 568 industrial properties in 41 states that total 112 million square feet.

Stag currently pays out a 12.25 cent monthly dividend per share at a yield of 3.77%. That comes out to $1.47 per share over 12 months. Since going to a monthly dividend model in 2013, it has increased its dividend every year. The stock is currently trading at about $38 per share, so if you owned 150 shares, you’d have received about $221 per share every year in dividends, or roughly $18 per month.

Like Realty Income, Stag’s performance is cyclical, but it is among the more stable REIT’s in that its clients are single tenants. With about 484 of its buildings being warehouses, the company has a lot less in capital expenditures compared to other types of properties.

In addition, no single property accounts for more than 3% of its rental revenue, so its portfolio is well diversified. Finally, industrial real estate has been one of the best-performing segments of the real estate market, with rents up 7.6% year over year with a low 4.6% vacancy rate, according to the November 2023 National Industrial Report from Commercial Edge.   

These trends have resulted not only in a consistent dividend but also solid returns. Stag Industrial has averaged a 7.1% annual return over the past 10 years as of Dec. 15 and a 12.9% total return, including dividends.

These two stocks stand out, not only for their monthly dividends but also for their consistency and their competitive long-term returns. Their returns might fluctuate depending on economic conditions, but their dividends have been steady over time.

This post originally appeared at ValueWalk.com.

Category: Best Dividend Stocks