Retirement Income: 3 Monthly Dividend Stocks Yielding Up to 17.3%
October 9, 2019
Monthly Dividend Stocks Pay Reliable Retirement Income
If you’re looking to generate retirement income from your portfolio, then you have probably run into this problem: infrequent distributions.
Most dividend stocks pay dividends on a quarterly basis. Bonds do even worse, mailing out checks only once or twice a year.
For younger investors, this doesn’t present an issue. But for retirees, it’s a challenge. Trying to balance monthly bills with infrequent payments is doable, but certainly not convenient.
One solution: monthly dividend stocks. Over the past few years, a small but growing number of companies have opted to pay distributions 12 times a year. Such arrangements are a true win-win situation for everyone, as companies gain a loyal shareholder base while investors can better match their income with their expenses.
No, the list of monthly dividend stocks doesn’t include a lot of blue-chip names. The category consists mostly of ex-income trusts and a hodgepodge of other unusual businesses. But investors can find enough quality and variety here to build a stream of retirement income stream.
So to help get you started, I’ve highlighted a few of my favorites.
Of course, the list below doesn’t constitute any “buy” recommendations. You still need to do your homework, and no one should ever buy a stock based on its payment schedule. But these companies represent a good starting point for further research.
Pacific Coast Oil Trust
Long-time readers know I often praise the virtues of a group of companies I’ve dubbed “cash cows.” These are mature businesses with little need to invest in new properties, plants, or equipment. As a result, such companies can pay out most of their cash flows to shareholders in the form of generous dividend payments.
Pacific Coast Oil Trust (NYSE:ROYT) is a great example. The partnership owns a collection of oil wells in the Santa Maria and Los Angeles Basins. But unlike traditional energy companies, Pacific Coast spends nothing in the way of exploration or drilling. Instead, management is content to milk their existing properties and pay the proceeds to investors.
For unitholders, this translates into an impressive yield of 17.3%.
To be clear, such high yields come with high risks. Pacific Coast’s cash flows swing with the commodity market. Furthermore, the royalty trust’s wells, and by extension, its distributions, will eventually run dry. But for investors who understand the risks upfront, these can still be lucrative investments.
STAG Industrial Inc
Over the past decade, e-commerce has turned brick-and-mortar retailers into road pizza.
Behind the scenes, e-commerce companies need to build sophisticated logistical systems to satisfy online orders. Online retailers need three times as much warehouse space as traditional stores. And that has created a boon for industrial landlords.
STAG Industrial Inc (NYSE:STAG) is one of the largest owners of such properties in the country. Since going public in 2011, the real estate investment trust (REIT) has quietly built up a real estate empire of 409 buildings across 38 states.
Thanks to the booming demand for warehouse space, the REIT has managed to jack up rents while maintaining a low vacancy rate. That has resulted in booming cash flows.
Since tenants pay STAG on a monthly basis, management returns profits to investors in the same fashion. Today, the trust pays a monthly distribution of almost $0.12 per unit. That comes out to an annual yield of 4.7%.
Main Street Capital Corporation
Main Street Capital Corporation (NYSE:MAIN) is the triple-play of monthly dividend stocks: a safe payout, a respectable yield, and growth potential.
The company’s secret comes down to its unique niche in the financial world. Management provides loans to small and mid-sized businesses nationwide. Because large banks have mostly ignored this market segment since the last financial crisis, Main Street Capital can charge high-interest rates.
This has resulted in outstanding returns for investors. The company earns a yield between 8.0% and 12% on new loans. Strict loan covenants ensure the company gets paid before other creditors see one red cent.
This model, in combination with savvy investment decisions on the part of management, has allowed Main Street Capital to increase its distributable net investment income per share three-fold since going public in 2007.
For investors, this has created quite the income stream. Today, the company pays a monthly dividend of $0.21 per share. Main Street Capital supplements these payments further through special dividends on a semi-annual basis. That combination results in a total dividend yield of almost six percent.
