In this article, we will discuss some of the best monthly dividend stocks with over 5% yield.
Dividend stocks have always been a go-to choice for investors, no matter how frequently they receive payouts. Companies carefully decide how often to reward their shareholders. While annual or semi-annual dividends can offer larger sums, their unpredictability can leave investors in a bit of a pickle. Most major firms stick to quarterly payouts for practical reasons, but some opt for monthly distributions, which many investors find appealing as they provide a steady flow of passive income. Monthly payouts offer immediate cash flow, helping with day-to-day financial management. Moreover, a cut in monthly dividends would have a smaller immediate impact, making them feel almost like a regular paycheck. However, history shows that while companies offering monthly dividends may offer higher yields, they sometimes fall short on maintaining consistent dividend policies.
Regardless of how often they are paid, dividend stocks have delivered impressive returns over the years. Investors often aim to reduce risk in their portfolios, and dividend stocks offer a dependable way to do so. A report by S&P Dow Jones Indices underscored the growing importance of dividends as a source of personal income. Over the years, dividend income has consistently increased, rising from 2.68% in late 1980 to 7.88% by mid-2024. In contrast, interest income has declined, falling from 14.58% to 7.61% during the same timeframe.
Analysts also suggest adding dividend stocks to portfolios due to the advantages they offer. Savita Subramanian, an equity and quant strategist at Bank of America Corp., also recommended that investors increase their holdings of dividend stocks. Here are some comments from the analyst:
“You want to be in safe dividends — and I know this is the most boring call of all time, but sometimes boring is good. We believe that we are now in a total return world in which the contribution of dividends to total market returns could be significantly higher than it was in the last decade, a period marked by falling cash yields and lofty price returns. We advise investors to seek out companies with above-market and secure (not stretched) dividend yields.”
Within dividend strategy, investors are increasingly drawn to companies that regularly boost their dividends, prompting many firms to focus on sustaining and growing these payments, even in tough economic times. This approach has proven effective, as companies with a track record of dividend growth have yielded impressive long-term returns. A report by Cohen & Steers highlighted that from 2000 to 2010, dividend-paying firms outperformed their non-paying counterparts by an annual margin of 620 basis points, while also experiencing significantly lower risk, as indicated by standard deviation. Over a 30-year period ending in 2011, the advantages of dividend-paying companies became even clearer, with those initiating or increasing dividends consistently outperforming both other dividend-payers and non-payers, delivering higher returns with less volatility.
Although dividend stocks underperformed in 2024, their outlook remains promising. Analysts expect a strong rebound for these stocks, especially with the addition of several major tech companies to the dividend-paying ranks, signaling potential growth in this sector. Given this, we will take a look at some of the best dividend stocks that pay monthly dividends.
Photo by Viacheslav Bublyk on Unsplash
Our Methodology:
For this article, we looked through a list of companies that pay monthly dividends and picked those with yields above 5% as of January 14. While analysts don’t usually recommend stocks with extremely high dividend yields because they may indicate financial issues, we chose companies with a consistent history of stable dividends despite their high yields. The stocks are ranked in ascending order of their dividend yields. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
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).
12. Main Street Capital Corporation (NYSE:MAIN)
Dividend Yield as of January 14: 5.10%
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 stock has outperformed the broader market in the past 12 months, surging by over 34.3%. The company ranks highly in cost efficiency, with an annualized Operating Expenses to Assets Ratio of 1.3%. This figure, representing non-interest operating expenses as a percentage of the average total assets for the quarter, remained steady for both the quarter and the twelve-month period ending September 30, 2024.
In the third quarter of 2024, Main Street Capital Corporation (NYSE:MAIN) posted a total investment income of $136.8 million, marking an 11% increase compared to the same period in the previous year. The company completed $51.6 million in investments within its lower middle market (LMM) portfolio, which included an $11.2 million investment in a new LMM portfolio company. Moreover, its cash position remained strong, ending the quarter with $84.4 million in cash and cash equivalents, up from $60 million at the end of December 2023.
In addition to paying monthly dividends, Main Street Capital Corporation (NYSE:MAIN) also has a reputation for paying supplemental dividends to shareholders. In November, the company achieved its 13th consecutive quarter of paying supplemental dividends, which makes MAIN one of the best dividend stocks on our list. It currently pays a monthly dividend of $0.30 per share and has a dividend yield of 5.10%, as of January 14.
At the end of Q3 2024, 7 hedge funds tracked by Insider Monkey held stakes in Main Street Capital Corporation (NYSE:MAIN), compared with 8 in the previous quarter. These stakes are worth over $21 million in total.
11. Gladstone Land Corporation (NASDAQ:LAND)
Dividend Yield as of January 14: 5.35%
Gladstone Land Corporation (NASDAQ:LAND) is a real estate investment trust company that owns and acquires farmlands and farm-related properties. In the past 12 months, the stock has fallen by over 26%. The decline was due to challenges the company faced from lower crop prices, which affected some of its tenants. Consequently, it had to reclaim 20 farms, either leaving them unoccupied or managing them directly. In addition, the company renegotiated some leases, accepting lower initial rental rates in return for a larger share of future crop revenues.
However, investors need not worry too much about this issue, as Gladstone Land Corporation (NASDAQ:LAND) expects to resolve it by the end of the year. The company anticipates higher revenue in the second half of 2025, aligning with the harvest season. This boost should help the REIT maintain its dividend growth going forward.
Gladstone Land Corporation (NASDAQ:LAND) saw a strong performance in the third quarter of 2024 from its annual row crop farms in California and Florida, with both value and rental income increasing. However, many permanent crop farms in the western regions have struggled with falling crop prices, higher input costs, and water availability concerns. To address these challenges, the company implemented a new leasing strategy for some of these farms. This approach provides tenants with a cash allowance to help cover expenses, in return for the company receiving a larger share of the gross crop proceeds. Although this is intended as a temporary solution, it is viewed as the most profitable option for these farms due to their history of high yields, solid crop insurance, and rising crop prices.
Gladstone Land Corporation (NASDAQ:LAND) has pleased investors with its dividend performance. The company has paid 141 consecutive monthly dividends to shareholders and increased its payouts 35 times over the last 39 years. Currently, it pays a monthly dividend of $0.0467 per share and has a dividend yield of 5.35%, as of January 14.
As of the close of Q3 2024, 5 hedge funds in Insider Monkey’s database owned stakes in Gladstone Land Corporation (NASDAQ:LAND), down from 9 in the preceding quarter. These stakes have a consolidated value of more than $6.5 million.
10. Realty Income Corporation (NYSE:O)
Dividend Yield as of January 14: 5.96%
Realty Income Corporation (NYSE:O) ranks tenth on our list of the best dividend stocks with over 5% yield. The American real estate investment trust company invests in single-tenant commercial properties in the country. Among the several REITs in the US, Realty Income distinguishes itself as exceptional. Over the last 30 years, it has navigated significant events like the dot-com crash, the Great Recession, and the coronavirus pandemic, all while consistently increasing its dividend. Even at the height of the Great Recession, its occupancy rates never fell below 96.6%, and they currently stand at approximately 98.7%. In summary, the company has maintained a strong business and proven its resilience during tough financial periods.
One of the main reasons for this stability is that Realty Income Corporation (NYSE:O) boasts a solid financial foundation with an investment-grade balance sheet. Its substantial size facilitates easier access to capital markets, allowing it to obtain favorable rates on debt to support growth. In addition, its financial strength and stability make it more advantageous to issue stock on Wall Street at attractive prices.
Realty Income Corporation (NYSE:O) is among the best monthly dividend stocks, having steadily increased its payouts since its IPO in 1994. On December 10, the company raised its monthly dividend by 0.2%, bringing it to $0.264 per share. This marks the fifth dividend hike in 2024. The stock supports a dividend yield of 5.96%, as of January 14.
Parnassus Investments highlighted Realty Income Corporation (NYSE:O) in its Q3 2024 investor letter. Here is what the firm has to say:
“Realty Income Corporation (NYSE:O) is poised to benefit from lower interest rates. Because its commercial tenants are mostly on 10-year leases, the stock’s steady dividend stream is attractive in the current environment of slow deceleration in the economy with rates coming down. In this favorable backdrop, the company also continues to execute well.”
The number of hedge funds tracked by Insider Monkey owning stakes in Realty Income Corporation (NYSE:O) grew to 23 in Q3 2024, from 19 in the previous quarter. These stakes are worth over $163.5 million in total. Among these hedge funds, AEW Capital Management was the company’s leading stakeholder in Q3.