We recently compiled a list of the 12 Monthly Dividend Stocks with Over 5% Yield. In this article, we are going to take a look at where Realty Income Corporation (NYSE:O) stands against the other dividend stocks.

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.

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).

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.

Overall O ranks 10th on our list of the best monthly dividend stocks with over 5% yield. While we acknowledge the potential of 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. 

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article is originally published at Insider Monkey.