3 Monthly Dividend Stocks Paying Up to 23%
July 24, 2020
Three Monthly Dividend Stocks for Retirement Income
If an idiot like me can generate reliable income from monthly dividend stocks, then I’m betting you can too.
Look, it’s no secret that low interest rates have battered savers. Rock-bottom yields will force millions of Americans to choose between spending more time in the workforce or dialing back their retirement aspirations.
To make matters worse, savers often have to juggle monthly bills with infrequent payouts. Traditional dividend stocks only send out checks every three months. And fixed-income investments, like bonds or certificates of deposit, pay interest only on an annual or semi-annual basis.
One solution? Monthly dividend stocks.
Over the past few years, I have highlighted dozens of monthly dividend stocks to my subscriber list. Historically, this group used to only consist of ex-royalty trusts. But nowadays, a growing number of companies have started sending out checks on a 30-day schedule.
It’s a real win-win situation. The companies behind these monthly dividend stocks develop a loyal shareholder base. And investors, meanwhile, can better balance their income with their monthly expenses.
Plus, who doesn’t like to see a check show up in the mailbox on a regular basis? Once you assemble a portfolio with a few of these companies, it’s like signing up for a torrent of passive retirement income.
To help get you started, I’ve featured three of my favorite monthly dividend stocks below.
To be clear, this list doesn’t represent a series of “buy” recommendations. But it does serve as a great starting point for further research.
Main Street Capital Corporation
Main Street Capital Corporation (NYSE:MAIN) is pretty straightforward to wrap your head around. Management lends money to small- and mid-sized businesses, sometimes taking an additional equity stake in the companies. In exchange, customers pay Main Street ongoing interest and dividend payments.
I often describe this market as the “sweet spot” of the U.S. economy. The customer base consists of established, profitable businesses with steady cash flows. But because of excessive regulations from Washington, these firms have been cut off almost completely from borrowing from traditional financial institutions. As a result, Main Street can charge exceptionally high interest rates on loans, with little in the way of defaults. The dream combination of any lender.
So what does Main Street do with all of that interest income? For the most part, the firm pays it out to shareholders.
The company sports a monthly dividend of almost $0.21. Management supplements those payments with a special distribution at the end of each year. Altogether, that comes out to a total dividend yield of 7.9%.
Shaw Communications Inc
You have a pretty straightforward thesis with Shaw Communications Inc (NYSE:SJR). It’s a well-run telecom company serving millions of customers across Western Canada. Customers pay their cell phone bill. You get a five percent dividend. And given people’s need to stay connected, those checks have rolled in like clockwork for decades.
And that thesis seems to have held up through COVID-19. For the three months ended February 29, Shaw Communications’ average revenue per customer grew by 6.8% year-over-year. Total revenues jumped by almost four percent to $1.4 billion. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 9.5%. (Source: “Shaw Announces Second Quarter and Year-to-Date Fiscal 2020 Results,” Shaw Communications Inc, April 9, 2020.)
That type of performance bodes well for shareholders. Shaw may put dividend hikes on hold temporarily, given the uncertainty surrounding COVID-19. But as long as the underlying business continues to post blowout results, investors can count on their dividend checks continuing to roll in month after month.
Permianville Royalty Trust
Permianville Royalty Trust (NYSE:PVL) is the ultimate cash cow. The partnership owns stakes in hundreds of oil wells across Texas, Louisiana, and New Mexico. But unlike traditional energy companies, Permainville doesn’t spend any money on drilling for the next big strike. Instead, management simply milks existing properties and pays out all of their profits to unitholders.
This has created quite the income stream. Over the past year, Permianville has paid out almost $0.27 per share in distributions. And based on the trust’s current unit price, that comes out to a 12-month trailing yield of 23%!
Of course, above-average payouts come with above-average risk. Permainville’s dividends swing up and down with energy prices. Moreover, these distributions will steadily decline as the partnership’s wells run dry.
But for investors who understand the risks up front, cash cows like Permainville Royalty Trust can make for attractive income streams.
