In this article, we will analyze the list of best dividend stocks that offer monthly dividends.
Over the years, dividend stocks have consistently demonstrated resilience in challenging market conditions. While the recent focus on AI might suggest otherwise, the long-term attractiveness of these stocks has increased. Income investors have taken note of this trend, which is reflected in the growing role of dividends as a portion of personal income. According to a report by S&P Dow Jones Indices, the share of dividend income has risen from 2.68% in the fourth quarter of 1980 to 7.88% in the second quarter of 2024, highlighting dividends as a significant source of income. The report also mentioned that since 1936, dividends have contributed to over one-third of the broader market’s total equity returns, with the remaining two-thirds coming from capital appreciation.
This highlights how dividends have become increasingly important over the years. When considering inflation, dividends have outpaced it, suggesting that investors should focus on these stocks. A report by Wisdom Tree noted that from 1957 to 2023, dividends grew by an average of 5.7% annually, which is more than 2% higher than the inflation rate. The report also pointed out that in the last 64 years, dividends only declined in six years, and only once by more than 5%. In contrast, stock prices fell in 18 of those years, with the worst annual decline exceeding 40% and an average drop of over 11%. Stock prices were more than twice as volatile as the dividend cash flows, as short-term prices are more influenced by market sentiment, while long-term value is driven by cash flow stability.
Also read: 10 Highest Paying Monthly Dividend Stocks
When investing in dividend stocks, receiving payments more often is definitely a plus. Although most dividend stocks distribute payments to shareholders on a quarterly basis, there are a few hundred publicly traded companies that opt to pay dividends monthly instead. However, monthly dividend stocks have their downsides. While they offer appealing investment opportunities, their high yields can be misleading, often accompanied by multiple dividend cuts. The high yields are primarily due to the nature of the companies that opt for monthly payments, such as real estate investment trusts (REITs), closed-end funds, business development companies (BDCs), and royalty trusts, which are common among monthly dividend payers. That said, many monthly dividend companies have not only kept up their payouts over the years but have also increased them, all while maintaining high yields.
Once the risks associated with high yields are addressed, investors can concentrate on the benefits of compounding. Monthly dividend stocks provide cash to investors more frequently than other stocks, allowing them to reinvest it sooner and take advantage of faster compounding. Since 1960, 85% of the cumulative total return of the broader market Index can be traced back to reinvested dividends and the effects of compounding, as reported by Hartford Funds. With this, we will take a look at some of the best dividend stocks that offer monthly payouts.
Our Methodology:
For this list, we reviewed a list of companies providing monthly dividends to their shareholders. Among these, we specifically chose businesses with robust dividend practices, consistently maintaining their payouts across multiple years. The majority of these selected companies operate within the Real Estate Investment Trust (REIT) sector, as they are required to allocate 90% of their income towards dividends. From that list, we picked 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s Q2 2024 database of 912 hedge funds and their holdings.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Stocks
10. Prospect Capital Corporation (NASDAQ:PSEC)
Number of Hedge Fund Holders: 6
Prospect Capital Corporation (NASDAQ:PSEC) is an American business development company (BDC) that invests in debt and equity in US middle market businesses across various industries, aiming to provide consistent and attractive returns to its shareholders. It is one of the largest and most established BDCs, with total assets amounting to $7.9 billion. Founded in 2004, the company has a history spanning 20 years, having invested through the Great Financial Crisis—a period many other BDCs, with much shorter histories, did not experience. It emphasizes downside protection, with 81% of its portfolio consisting of first lien, secured, or underlying secured assets. Over its two-decade history, the company has invested $20.9 billion across 423 investments, successfully exiting 303 of them.
Prospect Capital Corporation (NASDAQ:PSEC) has delivered stronger total returns than the median of publicly traded BDCs, measured by the 5-year total change in NAV plus dividends. The stock achieved a 38.7% total increase in NAV plus dividends over five years, slightly outperforming the 38.1% increase reported by the median publicly traded BDC. In its fiscal Q4 2024, the company reported a total investment income of $212.2 million, which fell by over 4% from the same period last year. However, it beat analysts’ estimates by $6.64 million.
Prospect Capital Corporation (NASDAQ:PSEC), one of the best dividend stocks, declared a monthly dividend of $0.06 per share on August 28. This was the company’s 85th consecutive monthly dividend payment. Since its inception, the company has paid an aggregate of $4.3 billion in cumulative distributions to all common shareholders. The stock offers a dividend yield of 14.34%, as of August 29.
At the end of Q2 2024, 6 hedge funds tracked by Insider Monkey held stakes in Prospect Capital Corporation (NASDAQ:PSEC), compared with 9 in the previous quarter. These stakes are valued at over $3.6 million. Among these hedge funds, McKinley Capital Management was the company’s leading stakeholder in Q2.
9. Main Street Capital Corporation (NYSE:MAIN)
Number of Hedge Fund Holders: 8
Main Street Capital Corporation (NYSE:MAIN) is a Texas-based business development company that provides customized debt and equity financing to lower-middle-market companies and debt capital to middle-market companies. The company reported solid earnings in the second quarter of 2024, marking another period of strong operating results. It posted a return on equity of 16.1%, distributable net investment income per share that exceeded the dividends paid to shareholders, and a new record for net asset value per share for the eighth consecutive quarter. In addition to this, the company has strong liquidity and a conservative leverage profile, which would provide it opportunities in both its lower middle market and private loan investment strategies.
In the second quarter of 2024, Main Street Capital Corporation (NYSE:MAIN) reported a total investment income of $132 million, which showed a 3.58% growth from the same period last year, which also beat analysts’ estimates by over $1.09 million. In the second quarter of 2024, the total dividends paid to shareholders increased by 13% compared to the same period last year, continuing the company’s trend of raising dividends over the past few years. The distributable net investment income for the quarter exceeded the dividends paid to shareholders, surpassing the monthly dividends by 49% and the total dividends by 5%. Additionally, strong performance in the second quarter, along with a favorable outlook for the third quarter, led to the declaration of a $0.30 per share supplemental dividend, scheduled for payment in September 2024. This marks the company’s twelfth consecutive quarterly supplemental dividend, alongside eight increases to the regular monthly dividends since the fourth quarter of 2021, which makes it one of the best dividend stocks that pay monthly dividends.
Main Street Capital Corporation (NYSE:MAIN) currently pays a monthly dividend of $0.245 per share. The company also announced a supplemental dividend of $0.30 per share. The stock has a dividend yield of 6.03%, as of August 29.
As of the close of Q2 2024, 8 hedge funds in Insider Monkey’s database held stakes in Main Street Capital Corporation (NYSE:MAIN), down from 13 in the previous quarter. These stakes have a total value of over $21.4 million. McKinley Capital Management owned the largest stake in the company in Q2.
8. LTC Properties, Inc. (NYSE:LTC)
Number of Hedge Fund Holders: 12
LTC Properties, Inc. (NYSE:LTC) is an American real estate investment trust company, headquartered in California. The company invests in senior housing and healthcare facilities through sale-leasebacks. The company’s investment portfolio consists of 194 properties spread across 26 states, managed by 31 operating partners. The portfolio is evenly divided between senior housing and skilled nursing properties, each making up about 50% of the total gross real estate investments. In the second quarter of 2024, it originated a $12.7 million mortgage loan, secured by a skilled nursing and assisted living campus in Texas, which includes 78 units and 104 beds. This five-year, interest-only loan carries a current rate of 9.15%. The investment is structured as an unconsolidated joint venture and is projected to generate approximately $884,000 in revenue in 2024.
LTC Properties, Inc. (NYSE:LTC) has a strong balance sheet, which makes it one of the best dividend stocks that pay monthly dividends. At the end of Q2, it had total liquidity of $189.3 million, which includes $6.2 million in cash, $118.2 million available through its unsecured revolving line of credit, and the potential to raise $64.9 million by issuing common stock under its equity distribution agreements.
LTC Properties, Inc. (NYSE:LTC) has been making regular dividend payments to shareholders since 1992. It currently offers a monthly dividend of $0.19 per share and has a dividend yield of 6.22%, as of August 29.
LTC Properties, Inc. (NYSE:LTC) was a part of 12 hedge fund portfolios at the end of Q2 2024, compared with 13 in the previous quarter, as per Insider Monkey’s database. The stakes held by these funds have a total value of over $47.3 million. Among these hedge funds, Balyasny Asset Management was the company’s leading stakeholder in Q2.