Dividends are beautiful. I’ve been living off of dividends since 2016, when they were able to start covering my expenses. Sure beats living off of a paycheck.
But as great as dividends are, there is one thing that’s kind of a bummer. That’s the payment frequency.
See, most US-based companies pay their dividends on a quarterly schedule. So you’re waiting three months between payments. This typically isn’t a big deal if you’re broadly diversified in your portfolio.
Different payment schedules across companies means dividends will regularly be coming your way. But what if you could eliminate that waiting period and collect your dividends monthly?
And what if you wanted a market-smashing yield on top of that increased payout frequency? I’ve got you covered.
Today, I want to tell you about three dividend growth stocks that pay monthly dividends and, together, offer a blended yield of 5.1%. Ready? Let’s dig in.
The first high-yield dividend growth stock paying monthly dividends is Main Street Capital (MAIN).
Main Street Capital is a business development company with a market cap of $2.9 billion.
BDCs like Main Street Capital fill in some of the financing gaps that are left by banks. They provide debt and equity capital to lower middle market and middle market companies, swimming in, shall we say, shallow waters where the big bank fish tend not to bother with. There’s risk to be found in doing that, but there’s also plenty of rewards to be found, too. Some of those rewards can be found in Main Street Capital’s dividend.
This stock offers a 6.1% yield, and the monster dividend is paid monthly.
And it’s not just yield here, either. As you all know, I focus on dividend growth stocks. That means a growing dividend. I’m not interested in high-yield junk stocks that routinely cut their dividends. Main Street Capital has been increasing its dividend for 11 consecutive years. Its five-year DGR of 3.2% isn’t huge, but I think that’s more than enough when you’re already getting a market-smashing 6%+ yield. In fact, they just increased their dividend by 2.4% in August. As has been said, the safest dividend is the one that just got raised. Furthermore, Q2 showed us that the dividend is easily covered by distributable net investment income per share.
Check this out. The stock is still priced below its pre-pandemic levels, despite the fact that the business is doing even better than it was before the pandemic struck. So I see that as a bit of a disconnect between the business and the stock. Most basic valuation metrics are in line with, or below, their respective recent historical averages. A BDC like this one isn’t for the faint of heart, and it’s not exactly the lowest-risk stock out there, but if you’re looking for a huge dividend that’s growing and paid monthly, this is a name to take a look at.
Next up, let’s talk about Realty Income (O).
Realty Income is a real estate investment trust with a market cap of $26 billion.
This company needs no introduction. It’s royalty among dividend growth investors. If you want legendary levels of durability and consistency in regard to your dividend, it’s tough to beat Realty Income. After all, they triple net lease quality commercial real estate to tenants involved in business models that range from convenience store operators to pharmacies. We’re talking about the retail real estate lifeblood of America.
We’re looking at a 4.3% yield here, and this is a dividend that’s paid monthly.
Not as high a yield as Main Street Capital, but these are totally different businesses with totally different risk profiles. Regarding that point, Realty Income is a Dividend Aristocrat. That’s a status reserved for the cream of the crop – stocks with 25 or more consecutive years of dividend increases. Realty Income has increased its dividend for 28 consecutive years. The five-year DGR of 4.2% certainly helps you to keep up with, or even exceed, inflation. And the dividend is protected by a payout ratio of 79.6%, based on midpoint guidance for this year’s AFFO/share.
This name has been a bit of a laggard, up only 11% YTD.
Last but not least, let’s dig into the high-yield dividend growth stock that is SL Green Realty (SLG).
SL Green Realty is a real estate investment trust with a market cap of $4.9 billion.
Whereas Realty Income is largely in retail commercial property, SL Green Realty is involved in office space real estate. Not just office space, but office space in NYC. They’re the largest owner of New York City office space. Not the best place to be in 2021, no doubt about it. But if you’re a long-term investor, like me, you’re not thinking only about 2021. You’re thinking about 2031, 2041, and 2051. While you wait for things to normalize, SL Green Realty is paying you handsomely.
This stock yields 5%, and yep – this is another big dividend that’s paid monthly.
Again, though, this isn’t chasing yield only. SL Green Realty isn’t some serial dividend cutter that yields 10%. I wouldn’t say it’s the highest-quality dividend growth stock out there – not by a longshot – but it is an interesting turnaround play on NYC office space real estate, and the big monthly dividend makes it easy to be patient. They’ve increased the dividend for 10 consecutive years, with a five-year DGR of 8.1%. More recent dividend increases have been quite modest. But FFO/share is easily covering the monthly dividend, with room for continued growth.
The stock is up 24% this year, but it’s still priced well below where it was before the pandemic.
— Jason Fieber
P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.
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