We recently compiled a list of the 10 Stocks that Pay Dividends Monthly. In this article, we are going to take a look at where Realty Income Corporation (NYSE:O) stands against the other stocks that pay dividends monthly.
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).
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: 19
Realty Income Corporation (NYSE:O) ranks fifth on our list of the best dividend stocks that pay monthly dividends. The American real estate investment trust company mainly invests in single-tenant commercial properties in the country. The stock began to recover in July after experiencing a decline of more than 10% during the first half of the year. The reason for this decline was partly due to the increase in interest rates following the pandemic. With rates still higher than pre-pandemic levels and unlikely to return to those lows anytime soon, the company is well-positioned to take advantage of this new normal. Its year-to-date returns come in at nearly 5%.
The stability of Realty Income Corporation (NYSE:O)’s portfolio continues to support its balance sheet. In the second quarter of 2024, the company maintained a strong occupancy rate of 98.8%, captured 105.7% of the rent on re-leased properties, and achieved same-store rental revenue growth of 0.2%. The portfolio, primarily composed of single-tenant, net-leased properties, helps minimize financial strain. With tenants like Wynn Resorts, Dollar General, and FedEx, the company enjoys a steady revenue stream. In addition, the company manages over 15,000 commercial properties across 89 industries. Its resilience in recessions is evident, with major sectors such as supermarkets and convenience stores that perform well in any economic environment.
On August 15, Realty Income Corporation (NYSE:O) declared a monthly dividend of $0.263 per share, which was consistent with its previous dividend. The company is a Dividend Aristocrat, having raised its dividends for 30 consecutive years. Moreover, it has never missed a monthly payout in over 55 years. The stock has a dividend yield of 5.16%, as of August 29.
At the end of June 2024, 19 hedge funds in Insider Monkey’s database held stakes in Realty Income Corporation (NYSE:O), down from 25 in the previous quarter. These stakes have a total value of more than $135.3 million. Among these hedge funds, AEW Capital Management was the company’s leading stakeholder in Q2.
Overall O ranks 5th on our list of the stocks that pay dividends monthly. While we acknowledge the potential 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 timeframe. 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.