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Earn Steady Income with Monthly Dividend Stocks: A Valuable Asset for Investors, Especially in Retirement
According to Owen Murray, director of investments for Horizon Wealth Advisors, when companies distribute cash to their shareholders, it reflects the company’s financial strength and provides tangible value.
While most dividend stocks make their payouts every three months, monthly dividend stocks are particularly appealing to individuals who depend on regular income to meet their monthly expenses.
To help you identify the best monthly dividend stocks, we have compiled a concise list based on key factors such as Wall Street’s “buy” consensus, market capitalization, a payout ratio below 100%, and a dividend yield surpassing 2.7%.
Top Monthly Dividend Stocks
1. Gladstone Investments (GAIN)
Sector: Financial services
Market cap: $439 million
YTD performance: 1%
Gladstone Investment is a private equity fund that offers both equity and debt capital to well-established middle-market companies with strong management teams and promising business fundamentals. Since its initial public offering (IPO) in 2005, the company has invested over $1.6 billion.
Gladstone maintains a diversified portfolio comprising 25 companies operating in 19 U.S. states and spanning 14 industries. As of the end of 2022, their portfolio had a total asset value of approximately $772 million.
Over the past five years, Gladstone Investment has consistently achieved an average return on equity (ROE) of 14%, surpassing the 9% ROE of its industry peers. Investors benefit from a monthly dividend payout of 12 cents per share, resulting in an impressive annual yield of 7.4%.
1. Double-digit five-year return: Gladstone Investment has achieved a strong performance with a double-digit return over the past five years, indicating successful investment outcomes.
2. Raised regular monthly distributions in 2022: The company increased its monthly distributions in 2022, which is positive for investors seeking consistent income.
3. Large equity investment stakes: Gladstone Investment holds substantial equity investment stakes, providing the potential for additional distributions through capital gains.
1. Declining ROE: The return on equity (ROE) has experienced a significant decline since mid-2021, suggesting potential challenges in generating profitability.
2. Slightly negative overall revenue growth: Over the past three years, Gladstone Investment has experienced slightly negative revenue growth, which may raise concerns about its ability to drive consistent top-line expansion.
3. Limited insider and institutional ownership: The company has low insider ownership (2.2%) and moderate institutional ownership (15.1%), potentially indicating a lack of strong support from insiders and institutional investors.
Price-to-Earnings (P/E) ratio: The company’s P/E ratio stands at 9, which implies a relatively low valuation compared to its earnings.
2. LTC Properties (LTC)
Sector: Real Estate
Market cap: $1.3 billion
YTD performance: -10%
LTC Properties is a real estate investment trust (REIT) specializing in senior housing and health care properties. Their portfolio consists of a total of 218 properties, with approximately 62% being assisted living facilities and 35% skilled nursing facilities.
The company has established strong partnerships with leading operators in the industry, including Prestige Healthcare, ALG Senior Living, Brookdale Senior Living, and Anthem Memory Care. Together, these top four partners operate around 40% of LTC’s properties.
In the first quarter, LTC Properties experienced a remarkable increase in net income, with a year-over-year growth of approximately 130%. The stock’s monthly dividend of 19 cents translates to a yield of 6.89%.
1. Significant year-over-year increase in net income: LTC Properties witnessed a substantial 130% rise in net income during the first quarter, indicating positive financial performance.
2. Annual increase in funds from operations: The company’s funds from operations showed yearly growth in the first quarter, reflecting a positive trend in its operational efficiency.
3. Potential demand from an aging population: As the U.S. population continues to age, there is a favorable outlook for sustained demand for senior housing facilities, which can benefit LTC Properties in the long term.
1. Decreased available line of credit liquidity: The company’s available line of credit liquidity has experienced a sharp decline compared to its level in 2020, potentially impacting its financial flexibility.
2. Lagging three-year total return compared to the S&P 500: LTC Properties has not performed as well as the S&P 500 index in terms of total return over the past three years, which may raise concerns for some investors.
3. No dividend hike since 2016: The company has not increased its dividend payout since 2016, which might be disappointing for investors seeking regular dividend growth.
Price-to-earnings (P/E) ratio: LTC Properties has a P/E ratio of 11, indicating a relatively modest valuation compared to its earnings.
3. Main Street Capital (MAIN)
Sector: Financial services
Market cap: $3.2 billion
Year-to-date (YTD) performance: 6%
Main Street Capital is a business development company (BDC) that specializes in providing long-term debt and equity capital to lower middle-market companies. Their support includes facilitating management buyouts, growth financings, recapitalizations, and acquisitions. With a total of 195 cumulative investments, Main Street concluded the first quarter of 2023 with $1.4 billion in assets under management.
Since going public in 2007 at a share price of $15, Main Street Capital has demonstrated remarkable dividend payouts. In less than 16 years, the company has distributed an impressive $37.56 per share in cumulative dividends.
Main Street Capital currently pays a monthly dividend of 23 cents per share, resulting in an annual yield of 6.9%. Moreover, in the first quarter, the company generated $81 million in net investment income, equivalent to approximately $1.02 per share.
1. Attractive forward earnings multiple: Main Street Capital boasts an appealing forward earnings multiple of 10.4, indicating a potentially favorable valuation compared to its anticipated earnings.
2. Impressive revenue growth in 2022: The company experienced noteworthy revenue growth throughout 2022, suggesting positive momentum and business expansion.
3. Dividend payout increase in 2023: Main Street Capital raised its dividend payout in 2023, which can be seen as a positive signal for investors seeking income-oriented investments.
1. Increased operating expenses in 2022: Main Street Capital faced a 12% increase in operating expenses during 2022, potentially impacting its profitability and cost management.
2. Decline in net income in the previous year: The company’s net income dropped by 26.9% in the previous year, which raises concerns about its overall financial performance and bottom-line profitability.
3. Decreased fee income in the first quarter: Main Street Capital experienced a year-over-year decline in fee income during the first quarter, which might indicate potential challenges or fluctuations in its fee-based revenue streams.
Price-to-Earnings (P/E) ratio: Main Street Capital currently has a P/E ratio of 12, reflecting a relatively moderate valuation in relation to its earnings.
4. Paramount Resources (POU.TO)
Market cap: $3.1 billion
YTD performance: 18%
Key Information on Paramount Resources:
Paramount Resources is a Canadian natural gas company that operates gas-producing properties in Alberta and British Columbia. The company achieved a record annual sales volume last year, highlighting its success in the industry.
Paramount Resources maintains a low and conservative payout ratio of only 26%. While this indicates a prudent approach to dividend distributions, it’s important to consider the company’s cash flow generation to assess the sustainability of the dividend.
The company currently pays a monthly dividend of 10 cents per share, resulting in an annual yield of 5.1%.
1. Low payout ratio: Paramount Resources has a payout ratio below 30%, indicating a conservative approach to dividend distributions.
2. Attractive forward multiple: The company boasts an attractive forward multiple of approximately 10, suggesting a potentially favorable valuation compared to anticipated future earnings.
3. Forecasted revenue growth: Paramount Resources is expected to experience annual revenue growth of 7.4% over the next two years, which indicates positive growth prospects.
1. Relatively small monthly dividend: The company offers a relatively modest monthly dividend, which may be less attractive to investors seeking higher income potential.
2. Operations suspension due to wildfires: Paramount Resources had to suspend operations in the Grande Prairie and Kaybob regions due to wildfires in May, which can impact production and financial performance.
3. Exposure to foreign currency exchange risks: As a Canadian company, Paramount Resources is exposed to risks associated with fluctuations in foreign currency exchange rates, which can affect its financial results.
Price-to-Earnings (P/E) ratio: Paramount Resources currently has a P/E ratio of 5, indicating a relatively low valuation compared to its earnings.
5. Prospect Capital (PSEC)
Sector: Financial services
Market cap: $2.6 billion
YTD performance: -8%
Key Information on Prospect Capital:
Prospect Capital is a prominent public business development company (BDC) that maintains a diversified portfolio of investments. The company specializes in providing loans and investments to private, middle-market companies. Prospect Capital has a strong track record of consistent monthly dividend payouts, with approximately $4 billion in cumulative dividends distributed since its initial public offering (IPO) in 2004. Currently, the company declares a monthly dividend of 6 cents per share, resulting in an impressive yield of 11.2% based on the current share price.
One notable aspect of Prospect Capital’s risk management strategy is its focus on senior and secured lending. The majority of the company’s investments consist of loans secured by a first lien or other secured debt, providing collateral to protect against potential losses.
In the most recent quarter, Prospect Capital reported a net investment income (NII) of $106.7 million.
1. Strong NII growth: Prospect Capital experienced impressive year-over-year NII growth of 24.7% in the fourth quarter of 2022, indicating positive financial performance.
2. Exceptionally attractive dividend yield: With an 11.2% dividend yield, Prospect Capital offers a highly enticing income potential for investors seeking regular dividend payouts.
3. Consistent monthly dividend payouts: The company has a long history of consistent monthly dividend distributions, providing investors with a reliable income stream.
1. Decline in net asset value per common share: Prospect Capital reported a 6.2% decline in net asset value per common share on a year-over-year basis in the fourth quarter, potentially indicating challenges or fluctuations in the underlying value of its assets.
2. Decrease in net income: The company’s net income dropped on an annual basis in the last quarter, raising concerns about its overall profitability and financial performance.
3. No dividend hike since 2015: Prospect Capital has not increased its dividend payout since 2015, which might disappoint investors seeking regular dividend growth.
Price-to-Earnings (P/E) ratio: Not applicable (N/A) information is provided for the P/E ratio, suggesting that the necessary data for calculation may not be available or relevant in this context.