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3 Stocks with Monthly Dividends

12/02/2015 9:00 am EST


Tim Plaehn

Investment Research Analyst, Investors Alley

The income from these three stocks—paid monthly—provides a consistent yield in this market. No need to worry about the daily gyrations of the market as these companies will continue to deposit money into your account each and every month, notes Tim Plaehn, editor of The Dividend Hunter.

Investors should not jump on a stock just because it pays monthly dividends. However, if you can find quality dividend payers, the monthly payout is just an extra bonus.

Main Street Capital (MAIN) may be the best monthly dividend stock in the market. This business development company (BDC) has figured out how to stand apart from the pack in the face of the restrictive BDC rules.

MAIN has paid uninterrupted monthly dividends since switching from quarterly to monthly in September 2008. Starting in 2011, MAIN has been able to increase the monthly dividend twice a year every year.

Since 2012, the company has twice a year paid special dividends out of the profits earned from the equity investments.

Those special dividends have meaningful value, adding 26% of extra cash income on top of the monthly dividends so far in 2015. MAIN currently yields 7.1%.

Realty Income (O) is a net lease REIT, probably the most stable of the different REIT categories. This is one of the larger REITs with a $12 billion market cap.

The company has an unparalleled dividend record, having paid a dividend for 540 consecutive months with 81 dividend rate increases since 1994.

That works out to an increase almost every quarter. Both the Realty Income yield and annual dividend growth rate are about 4.5%.

With Realty Income you are not investing to maximize income, but to generate a very safe monthly income with a yield that is still very attractive compared to most other income investments.

The hotel/lodging REIT sector is one that cycles with the economy and currently the hotel REITs are about in the middle of a multi-year revenue and profit growth trend.

Chatham Lodging Trust (CLDT) is the one stock in the sector that pays monthly dividends. Two years ago Chatham increased its dividend by 14%, and in January this year, the rate was increased by 25%.

So far in 2015, the current dividend is about half of the generated FFO per share. It is probable that the dividend will be boosted significantly again in January.

Chatham Lodging is not a buy and hold forever stock, but it will pay an attractive and growing dividend as long as the up cycle for hotels continues. Watch for a slowing in FFO per share growth as your cue to exit. CLDT yields 5.2%.

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