In this article, we will analyze the list of the best dividend stocks that pay the highest monthly dividends.
Dividend stocks have consistently been popular with investors, regardless of how often they are distributed. However, when considering the frequency of these payments, it’s clear that companies carefully decide how often to reward their shareholders. While many large companies prefer to issue dividends quarterly for convenience, others provide monthly dividends, which some investors find more appealing. After all, who wouldn’t appreciate a steady stream of passive income each month? Nevertheless, history indicates that companies offering monthly dividends tend to have higher yields but often lack stable dividend policies.
Dividend stocks have consistently played a crucial role in the market’s overall returns. Since 1960, reinvested dividends and the power of compounding have accounted for 85% of the cumulative total return of the market, according to a report by Hartford Funds. The report further mentioned a broader view of these returns and highlighted that from 1940 to 2023, dividend income contributed an average of 34% to the total return of the broader market. The performance of dividend stocks during this period varied depending on market conditions. According to a report by Hartford Funds, during the 1970s—a decade marked by high inflation and sluggish economic growth—dividends accounted for 70% of total returns.
Also read: 10 Extreme Dividend Stocks With Upside Potential.
Among dividend strategies, investors are primarily drawn to high yields because they signify that the stock offers a substantial return through dividends compared to its price. Focusing solely on yield can be misleading. Some companies maintain dividend payments even when their financial health is shaky, while others distribute dividends too aggressively, leaving insufficient profits to reinvest in their operations. A high dividend yield might actually signal a struggling business with a low share price. This is where dividend coverage becomes a crucial measure of a company’s ability to meet its dividend obligations. If that is not in line, the company is likely using past retained earnings to fund current dividends. This situation often precedes a dividend cut, which can severely impact the company’s valuation.
That said, high-yield dividend stocks can still maintain strong dividend policies if their business fundamentals are solid. Many companies with above-average yields have consistently paid and even increased dividends over the years. Research suggests that, over the long term, such stocks often deliver better results. For example, a study by the University of Nevada found that portfolios composed of the top 10 highest dividend yield stocks from the Dow 30 index outperformed those with medium and low dividend yields from 1987 to 2012. The study also noted that investing in high dividend yield stocks can be profitable in the long run, despite potential short-term fluctuations in returns. In view of this, we will analyze the highest-paying monthly dividend stocks in this article.
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Our Methodology:
For this list, we looked at stocks that pay monthly dividends. Among them, we chose stocks with the highest dividend yields, which range from 11% to nearly 18% as of August 16. Most of these stocks are from the REIT and capital market sectors. REITs are obligated to distribute about 90% of their income to shareholders, which is good for income investors as it provides them with a reliable and substantial stream of dividends. However, it’s important to note that many of these stocks, despite their high yields, don’t have a consistent history of paying dividends and have experienced dividend reductions or pauses in the past. The stocks are ranked in ascending order of their dividend yields as of August 16.
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10. Stellus Capital Investment Corporation (NYSE:SCM)
Dividend Yield as of August 16: 11.55%
Stellus Capital Investment Corporation (NYSE:SCM) is a Texas-based investment management company that mainly invests in lower middle-market companies. The company holds nearly two decades of dedication to small and mid-sized businesses. During this time period, it has invested over $8.5 billion in lower middle market credit and equity across various cycles and industries.
Stellus Capital Investment Corporation (NYSE:SCM)’s investment strategy sets it apart from its peers by focusing on private companies with EBITDA ranging from $5 to $50 million. It spans a diverse array of industries, including aerospace and defense, business services, consumer products and services, and others. The capital deployed is frequently directed toward acquisitions, growth funding, leveraged buyouts, and recapitalization. In the second quarter of 2024, the company reported strong earnings, generating $26.6 million in revenues, up nearly 1% from the same period last year.
In addition, Stellus Capital Investment Corporation (NYSE:SCM) reported strong operating results for the second quarter, with U.S. GAAP net investment income of $0.48 per share and core net investment income of $0.50 per share, both of which covered the declared regular dividend of $0.40 per share. At the end of the quarter, the loan portfolio is yielding 11.7%. Having completed over eleven years of operations, the company has distributed a total of $262 million to its investors. The company currently offers a monthly dividend of $0.1333 per share for a dividend yield of 11.55%, as of August 16. It is among the best dividend stocks on our list.
9. Horizon Technology Finance Corporation (NASDAQ:HRZN)
Dividend Yield as of August 16: 11.63%
Horizon Technology Finance Corporation (NASDAQ:HRZN) is an American specialty finance company that offers secured loans to companies in the technology, life sciences, healthcare information and services, and cleantech sectors that are backed by venture capital. The stock is down by nearly 15% since the start of 2024, facing pressures from its peers. Hercules Capital Inc., one of the company’s major competitors, has seen its stock rise by more than 11% so far this year. That said, its recent quarterly earnings were somewhat encouraging for investors, though they didn’t fully meet expectations.
Horizon Technology Finance Corporation (NASDAQ:HRZN) exercised caution with new originations in the second quarter, concentrating efforts on sourcing high-quality investments to enhance the portfolio in the latter half of the year. The focus on portfolio management is aimed at maximizing the value of existing investments. As a result, significant progress was made, and the company anticipates a return to portfolio growth in the second half of 2024. Despite facing challenges, the company successfully generated net investment income during the quarter that surpassed the regular monthly distributions. This is where HRZN stands out among its peers, particularly when compared to Hercules Capital. While both companies have solid dividend policies, HRZN attracts investors with its monthly dividend payments, whereas Hercules Capital provides quarterly payouts. Although this doesn’t automatically make Horizon Technology Finance Corporation (NASDAQ:HRZN) the better choice, consistently maintaining monthly dividends in a challenging environment does indicate a strong balance sheet.
As of the most recent quarter, Horizon Technology Finance Corporation (NASDAQ:HRZN) has over $81.33 million available in cash. Its trailing twelve-month operating cash flow came in at $45.8 million and the levered free cash flow for the period is $38.8 million. On July 31, the company declared a monthly payout of $0.11 per share, which was in line with its previous dividend. With a dividend yield of 11.63% as of August 16, HRZN is one of the best dividend stocks on our list.
8. Ellington Financial Inc. (NYSE:EFC)
Dividend Yield as of August 16: 12.06%
Ellington Financial Inc. (NYSE:EFC) is a Connecticut-based specialty finance company that acquires and manages a range of financial assets, including those related to mortgages, consumers, corporations, and other financial sectors. The company’s main goal is to deliver appealing, risk-adjusted total returns to its shareholders by investing in opportunities that are expected to offer adequate compensation for the associated risks. The stock surged by over 3% on August 7, after reporting strong quarterly earnings, which impressed investors.
Ellington Financial Inc. (NYSE:EFC) achieved a non-annualized economic return of 4.5% for the second quarter, fueled by widespread contributions from its diversified credit and Agency portfolios, as well as its reverse mortgage platform Longbridge. The company also saw sequential growth in adjusted distributable earnings and book value per share. During the quarter, it also made significant investments across various credit strategies. Concurrently, the company reduced holdings in lower-yielding sectors, such as Agency and non-agency residential mortgage-backed securities The company is confident in its future investments as well. Looking ahead, its investment pipeline through its diversified proprietary loan origination channels remains robust. The loan originators it has invested in are not only contributing to this pipeline but also demonstrating strong profitability.
Ellington Financial Inc. (NYSE:EFC) is one of the best dividend stocks on our list because of its stable cash reserves on its balance sheet. The company ended the quarter with nearly $200 million available in cash and cash equivalents, up from $187.4 million in the previous quarter. It has never missed a dividend since 2009, maintaining a 15-year streak of consistent dividend payments. It currently offers a monthly dividend of $0.13 per share for a dividend yield of 12.06%, as recorded on August 16.
7. Dynex Capital, Inc. (NYSE:DX)
Dividend Yield as of August 16: 12.76%
With a dividend yield of 12.76% as of August 16, Dynex Capital, Inc. (NYSE:DX) ranks seventh on our list of the best dividend stocks. The real estate investment trust company mainly invests in mortgage-backed securities and other various real estate assets. The stock is slightly down by nearly 1.7% since the start of 2024, reflecting its ongoing recovery from the difficulties encountered during 2022-2023. These challenges were driven by high short-term interest rates, which raised interest expenses and exerted pressure on the trust’s book value. However, this situation is expected to shift as mortgage REITs are likely to become more attractive as sources of passive income in a lower interest rate environment. The Federal Reserve is anticipated to reduce the fed funds rate soon, with a meeting scheduled for September 17-18, 2024, where they will evaluate this potential adjustment.
Dynex Capital, Inc. (NYSE:DX)’s initial signs of recovery were evident in its second-quarter earnings. The company reported a reduced loss available for distribution in Q2 2024, although it still experienced a total economic loss for the quarter due to a decrease in book value caused by widening spreads between agency RMBS and US Treasuries. It raised capital at advantageous levels and is positioned to take advantage of the unusually wide spreads in the mortgage market. In addition, Dynex Capital, Inc. (NYSE:DX) continued to follow its strategic plan, emphasizing the provision of steady dividend income through prudent capital management. It successfully obtained funding at favorable rates. The company also made several important decisions to leverage its human capital, recognizing its importance for future success.
Dynex Capital, Inc. (NYSE:DX), one of the best dividend stocks on our list, has been making regular dividend payments to shareholders since 2008. Its monthly payout currently comes in at $0.13 per share. The company’s cash reserves have been consistently growing over the quarters. In the most recent quarter, it had more than $286 million available in cash and cash equivalents, up from $120 million six months ago.
6. Ellington Credit Company (NYSE:EARN)
Dividend Yield as of August 16: 13.79%
Ellington Credit Company (NYSE:EARN) is an American capital market company. Formerly known as Ellington Residential, the company was originally established as a real estate investment trust (REIT) specializing in residential mortgage-backed securities. Earlier in March, the Board of Trustees approved a major shift in the company’s investment strategy to concentrate on corporate collateralized loan obligations (CLOs). As part of this transition, the company ended its REIT status and rebranded as Ellington Credit Company.
The new business model seems to be working for Ellington Credit Company (NYSE:EARN). In the second quarter of 2024, the company expanded its CLO portfolio to $85.1 million, up from $45.1 million at the end of the previous quarter. As of August 9, 2024, the CLO portfolio had grown to $108 million, accounting for approximately 50% of the capital allocation. The company aims to complete the strategic transformation by the end of the year. During the quarter, the company’s MBS portfolio incurred a modest net loss due to fluctuations in interest rates and spreads. This contributed to a slight overall net loss for the period. However, as the company progresses with its shift from MBS to CLOs, it has seen an expansion in its net interest margin and a reduction in leverage ratios.
Ellington Credit Company (NYSE:EARN) reported a strong cash position in the second quarter of 2024. The company’s cash and cash equivalents jumped to over $118.7 million, from $22.4 million in the previous quarter. It has paid uninterrupted dividends to shareholders since 2013, which makes it one of the best dividend stocks on our list. The company pays a monthly dividend of $0.08 per share and has a dividend yield of 13.79%, as of August 16.
5. Oxford Square Capital Corp. (NASDAQ:OXSQ)
Dividend Yield as of August 16: 13.82%
Oxford Square Capital Corp. (NASDAQ:OXSQ) is a non-diversified investment management company that mainly invests in corporate debt securities and collateralized loan obligations (CLOs). In the second quarter of 2024, the company reported a net investment income (NII) of $7.7 million, up from $6.5 million in the previous quarter. Total investment income also grew modestly QoQ to $11.4 million, from $10.7 million. The company’s performance highlights a mixed financial landscape, showing increases in total investment income and strategic investment activities while experiencing slight declines in U.S. loan market prices.
Since the start of 2024, Oxford Square Capital Corp. (NASDAQ:OXSQ) has surged by nearly 4%, and analysts have a favorable outlook on the stock. Its recent quarterly earnings also contributed to this positive outlook. Its investment activity involved acquiring about $28.8 million in assets. Sales totaled roughly $3.4 million, while repayments reached approximately $15.8 million. The primary market issuance for the US. leveraged loans experienced a substantial rise compared to the previous year.
Oxford Square Capital Corp. (NASDAQ:OXSQ) is a strong dividend payer, paying regular dividends to shareholders since 2006. The company ended the quarter with over $30 million available in cash and cash equivalents, up significantly from $5.7 million six months ago. On August 13, it declared a monthly payout of $0.035 per share, which was consistent with its previous dividend. With a dividend yield of 13.82% as of August 16, OXSQ is one of the best dividend stocks on our list.
4. AGNC Investment Corp. (NASDAQ:AGNC)
Dividend Yield as of August 16: 14.34%
AGNC Investment Corp. (NASDAQ:AGNC) is a Maryland-based real estate investment trust company that mainly invests in residential mortgage-backed securities. This indicates that the company is not a conventional property-owning REIT. The business model is undoubtedly risky. Unlike physical properties, which change hands infrequently, AGNC Investment’s assets are traded continuously throughout the day. The value of AGNC Investment’s bond holdings is quickly affected by changes in interest rates, whereas property prices tend to be more stable. Additionally, there are mortgage-specific factors to consider, such as repayment rates and housing market dynamics. It is generally easier for investors to monitor the performance of a portfolio of physical properties, like those held by an apartment REIT, compared to understanding the complexities of a portfolio consisting of mortgage bonds.
That said, AGNC Investment Corp. (NASDAQ:AGNC) is faring well despite risky business dynamics. The stock is up by nearly 5% since the start of 2024 and its 12-month returns came in at over 5.7%. As of June 30, the company held an investment portfolio valued at $66.0 billion. This portfolio included $59.7 billion in Agency MBS, $5.3 billion in net forward purchases or sales of Agency MBS in the “to-be-announced” market, and $1.0 billion in credit risk transfer (CRT) and non-Agency securities, along with other mortgage credit investments.
AGNC Investment Corp. (NASDAQ:AGNC) started paying dividends as soon as it went public in 2008. Initially, it issued quarterly dividends until 2014, at which point it switched to monthly payments and has continued this practice to the present day. Since 2008, the company has returned $13.4 billion to shareholders through dividends, which makes AGNC one of the best dividend stocks on our list. It currently offers a monthly dividend of $0.12 per share and has a dividend yield of 14.34%.
3. ARMOUR Residential REIT, Inc. (NYSE:ARR)
Dividend Yield as of August 16: 14.47%
ARMOUR Residential REIT, Inc. (NYSE:ARR) is a Florida-based real estate investment trust company that invests in mortgage-backed securities (MBS). The company’s investments are committed to supporting homeownership across a wide and diverse range of Americans. It aims to create shareholder value by carefully investing in and managing a leveraged and diversified portfolio of MBS. In addition, it prioritizes maintaining dividends on common shares that are appropriate for the intermediate term, rather than focusing on short-term market fluctuations.
ARMOUR Residential REIT, Inc. (NYSE:ARR)’s portfolio remained robust in the second quarter of 2024, with its Agency MBS portfolio amounting to $8.9 billion and TBA Agency Securities totaling $1.2 billion. Net repurchase agreements reached $7.1 billion. The debt-to-equity ratio stood at 6.09:1, calculated by dividing repurchase agreements by total stockholders’ equity. When including TBA Securities forward-settling sales and unsettled purchases, the implied leverage was 7.44:1. The company also held interest rate swap contracts totaling $8.3 billion in notional value.
On July 23, ARMOUR Residential REIT, Inc. (NYSE:ARR) declared a monthly dividend of $0.24 per share, which was in line with its previous dividend. Overall, the company holds a 14-year streak of consistent dividend payments, which makes ARR one of the best dividend stocks on our list. The stock has a dividend yield of 14.47%, as of August 16.
2. Prospect Capital Corporation (NASDAQ:PSEC)
Dividend Yield as of August 16: 14.55%
An American business development company, Prospect Capital Corporation (NASDAQ:PSEC) ranks second on our list of the best dividend stocks. The company invests in debt and equity in US middle market businesses across various industries, aiming to provide consistent and attractive returns to its shareholders. With this focus, the company has allocated 81% of its investment assets to loans secured by a first lien or other senior secured debt, covering 122 portfolio companies across 36 different industries. Since its inception in 2004, Prospect has invested $20.7 billion across 421 investments and has successfully exited 292 of them.
Prospect Capital Corporation (NASDAQ:PSEC)’s current portfolio is valued at $7.9 billion and includes 122 investments. The portfolio generates a 12.1% annualized current yield on performing interest-bearing investments and a 9.7% annualized yield across all investments. Notably, 91% of the company’s total investment income comes from recurring interest income. The middle-market portfolio has an EBITDA of $106 million and is diversified across 36 industries. Additionally, PSEC serves as the sole or lead investor in 77% of its overall portfolio.
Prospect Capital Corporation (NASDAQ:PSEC) has a strong dividend history. The company has paid dividends to shareholders for 84 consecutive months, which makes PSEC one of the best dividend stocks on our list. In addition, since its inception through August 2024, its cumulative payouts amounted to over $4.3 billion. It pays a monthly dividend of $0.06 per share for a dividend yield of 14.55%, as reported on August 16.
1. Orchid Island Capital, Inc. (NYSE:ORC)
Dividend Yield as of August 16: 17.87%
Orchid Island Capital, Inc. (NYSE:ORC) is an American specialty finance company, headquartered in Florida. As monetary policy has shifted towards a more accommodative stance, equity prices for mortgage REITs have strengthened, enabling the company to raise common equity capital through its at-the-market program. During the second quarter of 2024, the company successfully raised approximately $100.7 million, generally at a slight discount to book value. These funds were invested in Agency RMBS assets at highly attractive levels. This influx of new equity capital allowed the company to expand its portfolio by approximately 16.6% during the quarter.
Orchid Island Capital, Inc. (NYSE:ORC) remained confident in its future investments as well. It expects that investment opportunities will continue to be attractive, with the potential for improved total returns if the Feds begins easing monetary policy, especially if the banking sector becomes more active in the Agency RMBS market. Even without such developments, the current investment environment offers appealing total returns, with hedged net interest spreads providing ample support for the current dividend level.
Orchid Island Capital, Inc. (NYSE:ORC) has paid regular monthly dividends to shareholders since its IPO in 2013, which makes it one of the best dividend stocks on our list. In 2013, its cumulative dividends came in at over $4.6 million, which grew to over $81 million at the end of 2023. Over these years, it returned approximately $658 million to shareholders through dividends. Currently, it pays a monthly dividend of $0.12 per share and supports a dividend yield of 17.87%.
While we acknowledge the potential of ORC as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than ORC but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.
