We recently compiled a list of the 15 Best Monthly Dividend Stocks To Buy Right Now. In this article, we are going to take a look at where Realty Income Corporation (NYSE:O) stands against the other monthly dividend stocks.
Despite common perceptions, 2024 turned out to be a strong year for dividends, even though the Dividend Aristocrats Index underperformed the broader market. Throughout the year, US companies consistently maintained or raised their dividend payouts. In addition, several major tech firms introduced dividends, demonstrating that companies can balance both growth and shareholder returns. By September 30, 2024, around 80% of the companies in the S&P index were paying dividends—a level that has remained relatively stable over the past decade. Notably, the technology sector accounted for nearly 24% of dividend-paying companies, up from 13% a decade ago, while the healthcare and industrial sectors also saw an increase in dividend issuers. This broader adoption of dividends has expanded investment opportunities, allowing equity-income investors to access high-growth and innovative companies. Given these trends, analysts remain optimistic about dividend performance moving into 2025.
Also read: 8 Best Value Dividend Stocks to Invest in According to Warren Buffett
Dividend stocks have long been a popular choice for investors, regardless of how often payouts are distributed. Companies carefully determine their dividend schedules, with annual or semi-annual payments offering larger sums but lacking consistency. While most major firms prefer quarterly payouts for their practicality, some choose monthly distributions, which many investors favor for their steady income stream. Monthly dividends provide immediate cash flow, making financial planning easier and offering a sense of stability, similar to a paycheck. Moreover, a reduction in monthly dividends tends to have a less noticeable short-term impact. However, while companies that pay dividends monthly often offer higher yields, they have historically struggled to maintain consistent payout policies over time.
Dividend stocks have consistently generated strong returns over time, regardless of their payment frequency. Historically, dividends made up about 40% of the market’s total return between 1936 and 2012. However, over the past decade, their contribution dropped to just 16%, according to a research note from BofA Securities published late last year. Looking ahead, Ohsung Kwon, a US equity strategist at BofA Securities, expects dividends to play a larger role in overall returns compared to the previous ten years.
Analysts point out that dividend growth has historically been closely tied to earnings performance. With strong earnings growth in 2024, they expect an even better showing in 2025. Goldman projects an 11% rise in earnings per share this year, up from an estimated 8% last year, which is likely to drive a 7% increase in dividends, compared to a 6% bump in 2024. Meanwhile, Kwon holds an even more bullish view, predicting a 12% jump in dividends this year, driven by accelerating earnings growth.
Analysts reassure investors not to be concerned about the widening gap between dividend stocks and the broader market. Chris O’Keefe, a portfolio manager at Logan Capital Management, views this divergence as an attractive entry point for those looking to invest in dividend stocks. Other analysts echo this sentiment, highlighting a positive outlook for dividend-paying companies. The Dividend Aristocrats Index, which tracks 66 companies with at least 25 years of consecutive dividend growth, has struggled to keep pace with the broader market since 2020. Dividend stocks saw renewed interest in 2022 as fears of a recession led investors toward defensive sectors like utilities and consumer goods. However, the rally was short-lived. By 2023, rising interest rates made bonds and money-market funds more appealing than dividend yields, prompting companies to conserve cash amid economic uncertainty. In 2024, many of the same high-growth stocks that surged during the pandemic have once again driven the market to record levels. That being said, dividend stocks have maintained steady performance over time and continue to be a strong long-term investment option. Given this, we will take a look at some of the best dividend stocks that pay monthly dividends.
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 15 stocks with the highest number of hedge fund investors, using Insider Monkey’s Q3 2024 database of 900 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).
A modern city skyline with a REIT retail building at the center to symbolize the company’s reach.
Realty Income Corporation (NYSE:O)
Number of Hedge Fund Holders: 23
Realty Income Corporation (NYSE:O) is an American real estate investment trust company that invests in single-tenant commercial properties in the country. The company performed well in 2024, exceeding initial expectations. The diversified REIT was set to achieve approximately 5% growth in adjusted funds from operations (FFO). At the start of the year, it completed the $9.3 billion acquisition of Spirit Realty, a move expected to be highly accretive. In addition, the company raised its full-year investment outlook from $2 billion to $3 billion.
Realty Income Corporation (NYSE:O) specializes in acquiring commercial properties, leasing them, and passing the rental income on to its investors. By the end of Q3 2024, the company owned 15,457 properties across the US, UK, and six European countries, up from 13,458 properties at the end of 2023. This growth was largely driven by its acquisition of Spirit Realty in January 2024. The company mainly leases properties to retail businesses that maintain strong performance even during economic downturns.
On January 14, Realty Income Corporation (NYSE:O) declared a monthly dividend of $0.264 per share, which was consistent with its previous dividend. A key factor behind the company’s is its strong financial position, backed by an investment-grade balance sheet. The company’s large scale also provides it with easier access to capital markets, allowing it to secure favorable debt terms for growth. Furthermore, the company has consistently increased its payouts since going public in 1994, which makes it one of the best dividend stocks that offer monthly payouts. The stock offers a dividend yield of 5.86%, as of January 29.
According to Insider Monkey’s database of Q3 2024, 23 hedge funds, growing from 19 in the previous quarter, held stakes in Realty Income Corporation (NYSE:O). These stakes have a consolidated value of more than $163.5 million in total. With over 1.7 million shares, AEW Capital Management was the company’s leading stakeholder in Q3.
Overall O ranks 5th on our list of the best monthly dividend stocks to buy. While we acknowledge the potential for O as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than O but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
