Best Stocks for Monthly Dividends
Most stocks that distribute dividends pay dividends quarterly, but some stocks issue dividends monthly. Monthly dividend payers are often preferred among income investors or retirees who value more frequent dividends.
Typically, most are real estate investment trusts (REITs), which are required by federal law to distribute 90% of their taxable income to investors through dividends in exchange for certain tax benefits. This makes REITs one of the best and most reliable dividend payers. The two best REIT stocks for monthly dividends are:
1. Real estate income
real estate income (NYSE:O) owns a portfolio of commercial real estate properties that it leases primarily to tenants through long-term contracts. It currently leases approximately 13,250 properties, and most of the taxable income the company earns goes toward dividends.
In fact, the company is so proud of its dividends that it even calls itself a ‘monthly dividend company.’ But this isn’t just a marketing slogan. Realty Income has increased dividends for 30 consecutive years, becoming a dividend aristocrat.
Realty Income currently pays a high yield of 5.32%, which puts it at the top of the Dividend Aristocrats list. This month, the monthly dividend was increased for the 123rd time since listing in 1994.
The dividend paid on January 2nd is 25.65 cents per share, a significant increase from 25.6 cents per share the previous month. Over a 12-month period, Realty Income paid dividends of $3.07 per share. So, if you owned 100 shares at $57 per share, you would receive $307 in dividends, or about $26 per month.
Returns will be cyclical based on the real estate market. But Realty Income is more stable than most because many of its customers are Lowe’s, 7-Eleven, Chipotle Mexican Grill and other single-tenant national chains with long-term contracts.
Over time, REITs have generated solid returns, especially when dividends are included. Realty Income has recorded an average annual rate of return of 7.1% since its debut in 1994, and the total rate of return including dividends is approximately 14% per year.
2. Industrial sites
Stag Industrial (NYSE:STAG) is another REIT that pays a monthly dividend. It operates in a different arena than Realty Income, as it owns and leases single-tenant industrial properties. It owns approximately 568 industrial properties totaling 112 million square feet in 41 states.
Stag currently pays a monthly dividend of 12.25 cents per share, with a yield of 3.77%. That works out to $1.47 per share over 12 months. Since switching to a monthly dividend model in 2013, dividends have been increased every year. The stock is currently trading at around $38 per share, so if you owned 150 shares, you would receive approximately $221 per share each year, or $18 per month, in dividends.
Like Realty Income, Stag’s performance is cyclical, but its clientele is a single tenant, making it one of the more stable REITs. With approximately 484 buildings used for warehouses, the company has much lower capital expenditures compared to other types of real estate.
The portfolio is also diverse, with no single property accounting for more than 3% of rental income. Finally, according to Commercial Edge’s November 2023 National Industry Report, industrial real estate was one of the best-performing sectors of the real estate market, with rents up 7.6% year-over-year and vacancy rates as low as 4.6%.
This trend has led to solid returns as well as consistent dividends. As of December 15, Stag Industrial had an average annual return of 7.1% over the past 10 years, and a total return including dividends of 12.9%.
These two stocks stand out not only for their monthly dividends, but also for their consistency and competitive long-term returns. Their returns can fluctuate depending on economic conditions, but their dividends have been consistent over time.
