We recently compiled a list of 10 Highest Paying Monthly Dividend Stocks. In this article, we are going to take a look at where Oxford Square Capital Corp. (NASDAQ:OXSQ) stands against the other high paying monthly dividend stocks.
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.
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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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.
Overall OXSQ ranks 5th on our list of the highest paying monthly dividend stocks. While we acknowledge the potential of OXSQ 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 OXSQ 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.