Published Wed, 02 Sep 2020 11:56:56 on Income Investors
These Monthly Dividend Stocks Come with Above-Average Payouts
You pay your mortgage every month. You make your car payment every month. Even your gym and utility bills get paid on a monthly schedule.
Yet most investments don’t work that way. Typically, bonds and stocks pay their investors on a semi-annual or quarterly basis. That can make it difficult to align your investment income with regular expenses.
Thankfully, there’s a solution: monthly dividend stocks.
Over the past few years, a growing number of companies have adopted more frequent distribution schedules. And this has created a real win-win situation for everybody.
For companies, it helps them develop a loyal investor base. Shareholders counting on regular income to pay their bills usually don’t jump ship if the business has a soft quarter or two.
Alternatively, retired investors can better match their income with expenses. Shareholders in a company’s dividend reinvestment program, or DRIP, can also reinvest their money to buy shares faster. This allows the effects of compounding to kick in even sooner.
To help get you started, I’ve highlighted five interesting monthly dividend stocks.
To be clear, the table below doesn’t constitute a list of buy recommendations. It does, however, represent a good starting point for further research.
First Trust MLP and Energy Income Fund 11.5% $247.7M First Trust New Opportunities MLP & Energy Fund 11.2% $104.2M Cross Timbers Royalty Trust 7.3% $37.5M PIMCO Municipal Income Fund 4.8% $345.7M Realty Income Corporation 4.4% $21.5B Source: Yahoo! Finance
5 Monthly Dividend Stocks to Consider
Let me say a few words about these monthly dividend stocks.
Pipeline funds, like First Trust MLP and Energy Income Fund (NYSE: FEI) and First Trust New Opportunities MLP & Energy Fund (NYSE: FPL), churn out some of the highest dividend yields around.
Wall Street also hates this industry, because analysts know that future earnings growth will be so-so at best. Low oil prices have forced drillers to dial back their production plans. And that will eventually translate into lower toll revenues for the companies that transport these commodities.
Then again, no one cashing a double-digit payout deserves to earn much in the way of growth. Come to terms with the fact that most of your returns in this industry will come from a sky-high yield; dividend growth will likely be meager to non-existent in the years to come.
But with investor interest in pipelines at all-time lows, you can scoop up these wonderful businesses for $0.80 on the dollar. And investors who sit around and patiently reinvest their distributions will likely beat the market as time goes by. It’s a great thing to watch.
Cross Timbers Royalty Trust (NYSE: CRT) represents the ultimate cash cow business. Rather than plowing profits into drilling more oil wells, management has opted to pay out all of their earnings to unitholders. As a result, this partnership comes with an impressive upfront yield of over seven percent.
Now, these distributions will fluctuate with energy prices. Moreover, distributions will end eventually as the wells run dry. But for investors who understand the risks upfront, this monthly dividend stock could represent a lucrative income stream.
Pimco Municipal Income Fund (NYSE: PMF) is a fund that holds a portfolio of municipal bonds. And it’s been one of my favorite vehicles for safe, reliable income. Defaults in the space, though they make headlines, are rare. Far fewer, in fact, than the defaults in the corporate bond market.
Yet, despite the safety, it’s still possible to earn respectable payouts. And in the case of PMF, this fund sports an upfront yield of almost five percent.
Finally, you have a simple story with Realty Income Corp (NYSE: O). The partnership buys up retail properties and rents them out to tenants. Each month, management passes on the rent checks to unitholders. And each year, the properties increase a little in value. That one-two combination has resulted in a wealth creation machine that has paid investors handsomely since the trust went public in 1994.
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|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|FIRST TRUST MLP AND ENERGY INCOME FUND||11.38||36.7||0.31||0.00||10.50|
|CROSS TIMBERS ROYALTY TRUST||9.49||7.9||1.20||0.86||8.61|
|PIMCO MUNICIPAL INCOME FUND||14.42||0.0||0.00||0.00||4.83|
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