7 Highest Paying Monthly Dividend Stocks

hey bowtie nation joseph hogue here with let's talk money and what is easily one of the most popular topics on the channel and you know i love those dividend stocks and the only thing better than collecting that cash flow is doing it every single month and while most dividend stocks pay out every three months there are actually hundreds of funds etfs and individual stocks that pay out every month but a lot of them are going to be the worst investment you can make one problem is a lot of these highest paying monthly dividend stocks are closed in funds they draw investors in with those dividend yields of 12 and 15 and higher but if you look at the share price you're actually losing money look at these two monthly dividend pairs down 60 percent over the last year and it wasn't just on that coronavirus crash these stocks and a lot of those high-yield funds see a constant loss to the stock price and while this is happening the dividend is cut as well so you might start off with maybe a twenty dollar share price and a two dollars and forty cent dividend which is twelve percent but then the shares fall by twenty percent over the year to sixteen dollars a share now this dividend is cut to a dollar ninety two each which is still a twelve percent yield on that new lower price so the fund is still attracting new investors but you're asked out because not only do you have a loss if you're ever going to sell but you're also collecting those lower dividends than you expected okay you can see it's a touchy subject with me i hate these dividend yield traps the stocks that promise those double digit yields and and then just lose your money because it doesn't have to be that way there are some great monthly dividend stocks out there that not only put that cash in your pocket every single month but also are going to give you those capital returns on a higher stock price so what i want to do with this video is show you those best monthly dividend stocks the highest paying that are not only going to keep up that dividend payment but not stress you out over the stock price well look at my seven favorite stocks here seven dividend stocks i hold in my own portfolio we're also going to talk about some of the different types of monthly dividend stocks you know how to find the best and some of the risks that could wipe out your portfolio so make sure you stick around for that before we get started though you know i gotta send a shout out to all my bowtie brothers and sisters all you in the nation thank you for spending a part of your day to be here if you're not part of that community yet just click that little red subscribe button it's free and you'll never miss an episode now you already know i'm not a fan of those closed in funds not only do they tend to lose your money but the fees are just ridiculous and many of these are going to be charging expense ratios of like two percent and higher and the reason is another the hidden traps in these funds to get those 12 and higher dividend yields these funds use an insane amount of leverage so they're investing in stocks paying maybe six percent yields but the fund is going to borrow twice as much as its assets to invest for example a hundred million dollar closed-in fund might borrow another 100 million dollars to invest 200 million in those six percent yielding stocks that would give it the 12 million dollars in dividends it would actually be 12 on the actual fund assets and the problem here is that one they pay interest on that borrowed money and they pass that down to investors through those expenses also though and this is a big problem with investing on margin anytime the market falls those investments take an even bigger tumble and the fund is going to lose more money so moral of the story here nation make sure you know what you're investing in if it's a fund is it an etf so one of those exchange traded funds or is it a closed in fund and 99 of the time i would just avoid these closed in monthly dividend pairs altogether now i do like those monthly dividend etfs but we'll do a separate video on that because today i just want to focus on those seven monthly dividend stocks make sure you tap that subscribe button though so you don't miss the dividend funds video as well now picking these dividend stocks we'll talk about i had to be careful because most of these monthly pairs are going to be in two business types real estate investment trusts or reits and business development corporations or bdcs reits are a special company type that owns property or mortgages now bdcs lend money to small and medium-sized businesses as well as take an equity stake so they're kind of like a bank and a private equity investor for small business both of these business types get a special tax break if they distribute the majority of their profits as dividends to investors so so you get investments with amazing yields but there's also going to be some risks here that most investors don't really understand both of these business types are highly affected by interest rate changes and real estate is highly leveraged with debt so so interest expense is going to be a big part of the business those mortgage rates they're going to borrow on short-term rates and then invest in those long-term mortgages so obviously directly tied to those rates bdc's here are basically banks so again directly tied to the changes in interest rates now the problem with this other than falling rates just make it harder for these types of businesses to make any money is that you're out there looking for the monthly dividend stocks and you just jump into a handful then you're likely to end up with a portfolio that's really concentrated in just these bdcs and the reits for example of the 68 monthly dividend stocks and the funds that i follow nearly half 29 of them are in these two business models and if half of your portfolio isn't just these two types of businesses then when these interest rate changes do come along or some other changes that affect these two business types your portfolio is going to be in trouble like you're eating ramen noodles for the rest of your life kind of trouble so for our seven monthly dividend stocks portfolio not only did i look for those highest paying stocks but i also wanted to create a portfolio that was diversified across sectors and business type agnc investment corporation ticker agnc is our mortgage reit pick with a 10.7 dividend yield and a good bet on that emri theme agnc holds a 103 billion dollar investment portfolio with 99 billion of that in agency mortgage-backed securities dividends have come down over the past few months on that crash in rates which is something that you would expect in the nimrate as long term rates come down the company is collecting less on those mortgage investments book value has been ugly for all the mortgage rates because of that interest rate picture and it's fallen to 17.52 cents per share for agnc now that means the shares are trading well under their book value which is a pretty good place in terms of value one bright spot though is that the net interest spread that's the difference between the interest rates on the investments minus those short term rates on which the company borrows that spread jumped in the third quarter so could be a signal of better profitability ahead analysts have a low target of 13 per share and a high around 16.50 each over the next year so potentially some upside return besides that dividend if the if the interest rate spread stays higher like it is this next one is a smaller company but a strong business gladstone investment corporation ticker gain and its 8.4 dividend yield now gladstone is one of those business development corporations the bdc is for what's called the middle market companies now these are companies in the u.s with earnings ranging from three to 20 million dollars so not quite big enough to list on the stock market but still big enough to need more credit and funding that can be provided by a traditional bank and why i like gain here is because it takes a higher equity share than most of these bdcs and gladstone's target investment is 25 equity and 75 debt versus the traditional bdc that's going to look for less than a 10 equity stake in the company that higher equity ownership might mean higher risk here but it's also going to mean higher returns on these investments and we see that in gains history of return on equity which is well above the industry average the five-year average roe of 17 is over three times the median roe for that bdc group and and even though near-term returns have come down it's still well above the average for the group gladstone's current portfolio is spread across 28 companies and 14 industries so a level of diversification there that should help it continue with those returns even in a sluggish economy dividends have consistently stayed around seven cents a share with some special payments of nine cents a share distributed regularly our next monthly dividend stock is a long time favor shaw communications ticker sjr a canadian telecom giant paying a 4.9 percent yield now shaw has historically been a wireline business but the acquisition of win mobile in 2016 is really starting to come through with some growth and and making wireless the company's biggest profit center and the company is investing in its network improvements with deployment of 700 and 600 megahertz spectrum that it acquired in recent auctions and really becoming a player in that wireless market shaw has 130 million dollars on the balance sheet and no debt maturities until 2023 so definitely the financial strength that we're looking for and the business isn't something that's going to take a big hit on that shelter in place environment so so first or second quarter earnings might actually be pretty decent now dividends have stayed fairly consistent even through the lockdowns and as a telecom company it shouldn't have a problem maintaining that payout we've got price targets from seven analysts here with targets from 1850 on the low end just above where it's trading now to 32 percent higher at 23.67 per share over the next year so great dividend and that upside price return gladstone commercial ticker god is a diversified reit specializing in industrial and office property paying an 8.2 percent dividend yield the company owns more than 15 million square feet at 122 properties in 28 states across the united states leases are spread across 106 tenants in 19 industries so extremely diversified here occupancy has held steady at 96.6 and the average lease term of seven and a half years here means that even a more severe recession should support the rent and that stability supports one of the most stable monthly dividends you'll find at 12 and a half cents per share every single month just one price target here at 22 per share about 16 over the current price and a great long-term investment that will just keep on paying even if stocks in the energy space have remained weak this year i wanted to include pambina pipeline ticker pba and its 7.4 monthly dividend pambina is a midstream oil company which means it makes its money on transporting oil and gas through pipelines as well as gas processing and some marketing services so overall a diversified business model here now the company has had to put some projects on hold to protect that cash flow but it's still maintained it's triple b credit rating and it has 2.5 billion dollars in available liquidity so so there's no real solvency risks here the company has maintained earnings growth through prior crises and it's actually been able to make some opportunistic acquisitions like like a recent purchase of kinder morgan assets pambina has historically kept its monthly dividend around 15 cents a share then it just distributes any free cash flow through a special dividend like the 21 cents per share payment in may analyst price targets range from 22 dollars a share on the low end to as high as 33 dollars per share over the next year main street capital ticker m-a-i-n is another favorite among dividend investors for a 7.7 percent yield now mainstream is another business development corporation specializing in loans and equity investments in those mid-sized businesses the company has regularly increased its dividend now at 20 and a half cents per share along with special dividends of over four dollars per share distributed since 2013. the company had 182 portfolio investments as of the first quarter with the largest representing just three percent of total fair value so so hit to any of these single investments isn't going to hurt the shares that much now one thing you always want to watch for in these bdc stocks these business development corporations is to compare the effective yield on the company's investments with the dividend yield that it's offering on the stock so in this case main street earns a weighted average yield of 9.7 on those loan investments and it's going to tell you this in the financial statements then it's going to turn around and pay out 7.7 in monthly dividends so that average yield that's above the committed dividend yield is going to be a must for that dividend sustainability realty income ticker o is easily the most popular reit and maybe one of the most popular of all stocks with a 4.9 dividend paid on a monthly basis realty income has 50 years of operating history and owns over 6 000 properties in 49 states puerto rico and the united kingdom retail stores have been slammed this year even though 83 of the rental revenue is coming from retail on this stock i'm okay with this one because it's diversified across some of the safer types of retail property like like convenience dollar stores drug and grocery lease terms average nine years and occupancy has never been below 96 for these properties rent growth isn't terrifically strong here at one percent annualized but it's consistent and supports that dividend now the dividend here isn't the highest among rates but investors love the monthly payouts and the company has reported 88 consecutive quarterly increases that four and a half percent annualized dividend growth has beaten that 2.9 average for reach so so expect this one to keep on paying click on the video to the right for my three favorite monthly dividend etfs three monthly dividend funds that will pay your bills don't forget to join the let's talk money community by tapping that subscribe button and clicking the bell notification

Channel: Let's Talk Money! with Joseph Hogue, CFA

Views: 522,740

Keywords: highest paying monthly dividend stocks, best monthly dividend stocks, monthly dividend stocks to buy, dividend stocks, top monthly dividend stocks, high yield dividend stocks, high yield monthly dividend stocks, monthly dividend investments, monthly dividend paying stocks, monthly dividend reits, what stocks pay a monthly dividend, are monthly dividend stocks a good investment, how to get monthly dividends

Id: w40-W4Tk568

Length: 12min 6sec (726 seconds)

Published: Mon Aug 10 2020