Get larger dividends on a monthly basis.
In the current low interest rate environment, with the closely watched 10-year U.S. Treasury bond yielding just under 1.7%, it’s natural for many income-oriented investors to seek out bigger yields in the stock market. But why settle for the same old blue-chip stocks that pay you a little over 2% once per quarter when you can tap into stocks with more than 7% yield — which pay you once per month instead? Big payouts combined with more frequent distributions offers the reliability that many folks are looking for as we start the new year amid some market uncertainty. If the regularity of monthly dividend stocks appeals to you, the following seven picks all offer at least 7% yields.
AGNC Investment Corp. (ticker: AGNC)
From a share price perspective, AGNC doesn’t stand out much as the stock is trading effectively flat from where it was a year ago — compared with 27% gains for the S&P 500 in the same period. But the typical S&P stock yields a paltry 1.3% at present and you only get paid every three months, while AGNC offers a 12-cent monthly payout that adds up to more than seven times that amount. Structured as a real estate investment trust, or REIT, AGNC gets special corporate tax breaks in exchange for a requirement that it deliver 90% of its income back to shareholders. As the company deals mostly in mortgage-related securities, shares were challenged by talks of higher rates. But thus far we’ve seen no moves from the Federal Reserve and mortgage rates remain at historic lows, so AGNC is still looking good in 2022 from an income perspective.
Broadmark Realty Capital Inc. (BRMK)
Broadmark is another REIT related to the property market, but unlike AGNC it doesn’t own the mortgages themselves. Instead it’s a so-called deed of trust lender, which means it hangs on to the deed for physical properties in the very short term in order to fund construction and development projects. Think of a construction loan where a property owner has the acreage to build an industrial park and uses the deed on the land as part of the collateral for financing. Shares of Broadmark have been challenged as the interest rate environment has pressured its margins, but consistent business continues to fuel generous monthly dividends of 7 cents per share.
Horizon Technology Finance Corp. (HRZN)
Though slightly underperforming the broader market last year with about 22% gains in its share price, Horizon is actually neck-and-neck with the S&P’s performance when accounting for “total returns” including dividends. That’s because this technology-focused financial firm pays a 10-cent monthly dividend that adds up big time for long-term investors. HRZN provides financing to startups, but increasingly has moved into medical technology and green energy opportunities as well as more traditional software and hardware tech. As its portfolio of investments grows and thrives, Horizon shares the profits with stockholders once per month.
PennantPark Floating Rate Capital Ltd. (PFLT)
PennantPark is a business development company that makes debt and equity investments in small-sized companies primarily in the U.S., usually investing between $2 million and $50 million per opportunity. The companies often are not rated by debt agencies, but if they were, PFLT admits they would largely be in junk bond territory, meaning these are distressed companies with substantial risk. Of course, that higher risk profile means a higher rate of return on successful investments. And with the stock up more than 20% in the last 12 months in addition to offering a tremendous monthly yield, it’s safe to say that PennantPark management knows what they are doing with their funds.
Prospect Capital Corp. (PSEC)
The top performing monthly dividend stock on this list, PSEC is up a whopping 57% in the last 12 months on top of delivering a juicy payout every 30 days or so. This financial firm makes its profits through a diverse portfolio of investments that include small financial services firms, health care providers, medical companies and industrial companies. There is volatility in many of these smaller investments individually, but a broad and diversified portfolio smooths out risk and has helped ensure a streak of 162 consecutive dividends ever since this company hit public markets in 2004.
Sabine Royalty Trust (SBR)
The Sabine Royalty Trust sounds almost regal, but in truth it’s just a rather boring investment vehicle that holds an asset and pays back shareholders from royalties on the underlying product. In this case, the asset is a network of oil and gas fields that stretches from Florida to New Mexico, that pays back shareholders as the oil and gas is brought to market and sold. There’s volatility in the payouts based on the price of the energy commodities sold on the open market at the time, but that volatility has swung in investors’ favor lately — with share prices surging 50% in the last year and distributions hitting 37.5 cents in late 2021 compared with a low of 16.7 cents in the January monthly dividend.
Stellus Capital Investment Corp. (SCM)
Stellus Capital was previously a very popular monthly dividend stock, up until it briefly suspended payouts in 2020 then resumed them at a significantly lower level than before the pandemic. There’s a lot of risk, obviously, given the history of this business development company. However, with six of the seven most recent paydays clocking in at 9.3 cents per share, those figures are almost back to the 11.3-cent monthly dividend paid at the end of 2019, thanks to a recovery in the SCM investment portfolio over the last year or so. There’s risk here, but management seems to have gotten things back on track and SCM again provides a generous monthly payout to shareholders.
Here are seven monthly dividend stocks to buy with high yields:
— AGNC Investment Corp. (AGNC)
— Broadmark Realty Capital Inc. (BRMK)
— Horizon Technology Finance Corp. (HRZN)
— PennantPark Floating Rate Capital Ltd. (PFLT)
— Prospect Capital Corp. (PSEC)
— Sabine Royalty Trust (SBR)
— Stellus Capital Investment Corp. (SCM)
