After years of high inflation, many Americans — retirees in particular — could use a little extra cash every month. Monthly dividend stocks are one investment that can provide it.
What are monthly dividend stocks?
Monthly dividend stocks are a subcategory of dividend stocks: shares of publicly-traded companies that pay a portion of their profits to shareholders.
Many dividend stocks pay out dividends quarterly or annually, but monthly dividend stocks, as their name implies, pay out every month.
Top 9 monthly dividend stocks by yield
Below is a list of the 9 highest-yielding monthly dividend stocks with market capitalizations of at least $1 billion and payout ratios below 100%, meaning they are paying out less in dividends per share than they are bringing in in earnings per share (EPS).
They are ordered by forward dividend yield, which is calculated by dividing the sum of a company’s projected dividend payouts over the next year by its current share price.
Symbol | Company name | Forward dividend yield (annual) |
|---|---|---|
AGNC | AGNC Investment Corp. | 14.91% |
EFC | Ellington Financial Inc. | 13.00% |
EPR | EPR Properties | 8.34% |
APLE | Apple Hospitality REIT | 6.61% |
MAIN | Main Street Capital Corp. | 5.98% |
O | Realty Income Corp. | 5.93% |
SLG | SL Green Realty Corp. | 5.88% |
ADC | Agree Realty Corp. | 5.02% |
STAG | STAG Industrial | 4.15% |
Source: Dividend.com. Data is current as of May 23, 2024 and is for informational purposes only.
Pros and cons of monthly dividend stocks
The biggest advantage of monthly dividend stocks is the frequent, and often substantial, payments they provide. Some of the stocks listed above have yields more than twice as high as the 10-year Treasury note. And while Treasury bond holders only get paid twice a year, monthly dividend stock holders get paid every month.
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However, a high dividend is not necessarily a sustainable dividend. Many of the stocks listed above have payout ratios near 100%. If a company’s payout ratio goes over 100%, it will eventually have to borrow money to maintain its dividend, or cut the dividend.
If you’d prefer more reliable (but potentially lower) payments, other income investing strategies may work better for you, such as bond ladders, CD ladders or Dividend Aristocrat stocks. (The Dividend Aristocrats are S&P 500 dividend stocks that have raised their dividends every year for at least 25 years).
How to buy monthly dividend stocks
If you don’t have a brokerage account, you’ll need to open one to invest in monthly dividend stocks. Then you’ll need to choose between investing in individual monthly dividend stocks, or monthly dividend exchange-traded funds (ETFs).
Individual monthly dividend stocks
It’s easy to see the appeal of the stocks listed above; many offer yields higher than conventional income investments such as bonds, and far higher than passive investments such as S&P 500 index funds.
However, as we’ve discussed, some monthly dividend stocks may be at risk of cutting their dividends in the future. You can mitigate this risk through thorough stock research (which takes time), or by buying multiple monthly dividend stocks (which may require a lot of money).
Another option for easier investment diversification is to invest in a fund that pays dividends monthly instead.
Monthly dividend ETFs
There are ETFs that pay dividends monthly, such as the JPMorgan Equity Premium Income ETF (JEPI) and the Global X Nasdaq 100 Covered Call ETF (QYLD). However, these don’t necessarily invest exclusively in monthly dividend stocks — instead, they sell covered calls on stocks and use them to pay monthly dividends.
If you’re looking for the best ETFs in terms of dividend yield, you may want to check out some of the highest-yielding dividend ETFs instead.
Neither the author nor editor held positions in the aforementioned investments at the time of publication.
