5 Monthly Dividend Stocks to Own in April 2017
Monthly Dividend Stocks for April
With interest rates being so low over the past several years, income investors have been using dividend-paying stocks to boost the return of their portfolios. The thing is, though, most dividend stocks distribute on a quarterly basis. What if an investor wants to have stocks that pay dividends in April? Fortunately, there are companies that distribute every month. In this article, we are going to take a look at the best monthly dividend stocks to own in April 2017.
How to Find Monthly Dividend Stocks
Before you type “What stocks pay monthly dividends” in Google’s search box, note that there are two industries known for producing monthly dividend payers.
The first one is real estate. The obvious way to collect monthly income from real estate is by becoming a landlord. However, buying a property and renting it out requires some work. Moreover, finding good tenants and chasing down late payments is not really a fun experience, plus you also have to worry about things like property maintenance and insurance.
Luckily, there are publicly traded real estate investment trusts (REITs) that distribute on a monthly basis. A REIT is a company that owns and manages income-producing real estate. To qualify as a REIT, a company must generate at least 75% of its gross income from rent, interest from mortgages, or other real estate investments. They are also required by law to distribute at least 90% of their taxable income to shareholders each year as dividends. And since tenants typically pay rent on a monthly basis, some REITs are able to pay dividends to investors every month.
The other type of stock that is known for its monthly distributions is business development companies, or BDCs. BDCs invest in small- and medium-sized companies to help them grow in the early stages of their development. You can think of BDCs as venture capital funds, except that they are publicly traded. To qualify as a BDC, a company must invest at least 70% of its assets in U.S. firms valued at less than $250.0 million. Moreover, BDCs must distribute at least 90% of its profits to shareholders as dividends.
One thing to note about monthly dividend stocks is that because of their more frequent distributions, some investors are willing to pay a premium for them. Even though they are not the fastest-growing businesses, monthly dividend companies can carry sizable valuations. Still, there are cheap monthly dividend stocks that value-conscious income investors can consider.
Without further ado, let’s take a look at five monthly dividend stocks to consider owning in April 2017.
Monthly Dividend Stocks to Own in April 2017
|Company Name||Stock Symbol||Dividend Yield|
|Realty Income Corp||O||4.30%|
|Chatham Lodging Trust||CLDT||6.81%|
|EPR Properties Real Estate Trust||EPR||5.58%|
|LTC Properties Inc||LTC||4.79%|
|Main Street Capital Corporation||MAIN||5.80%|
1. Realty Income Corp
In my opinion, Realty Income Corp (NYSE:O) is one of the best dividend stocks on the market. The company is well-established and diversified. Its portfolio consists of 4,900 properties located in 49 states and Puerto Rico. Its 248 commercial tenants come from 47 industries.
Realty Income’s properties are generally freestanding buildings—meaning they are not attached to other structures—in prime locations with good access and visibility.
If you have ever been a landlord, you would know how important it is to have good tenants. The good news is that Realty Income’s properties are leased to some high-quality tenants such as Taco Bell, Rite Aid Corporation (NYSE:RAD), The Home Depot (NYSE:HD), and LA Fitness. By the end of 2016, properties leased to investment-grade-rated tenants accounted for approximately 47% of the company’s total annualized rental revenue. (Source: “Featured Properties,” Realty Income Corp, last accessed March 30, 2017.)
Moreover, with such a diversified portfolio, a regional downturn or sluggish growth in one industry likely won’t affect Realty Income’s total revenue stream that much.
According to the company’s most recent earnings report, Realty Income grew its revenue by 9.1% year-over-year to $287.8 million in the fourth quarter of 2016. Net income came in at $0.33 per share, a 6.5% increase from the year-ago period. Adjusted funds from operations (AFFO), an important measure of a REIT’s operating performance, improved 13.5% year-over-year to $193.0 million. (Source: ‘Realty Income Announces Operating Results For Fourth Quarter And 2016,” Realty Income Corp, February 22, 2017.)
One of the reasons to consider Realty Income in April is its recently announced dividend hike. Earlier in March, the company’s board of directors declared an increase in the REIT’s monthly dividend rate to $0.211 per share. This marked the 91st monthly dividend increase and the 78th consecutive quarterly increase declared by Realty Income. Throughout the company’s 48-year operating history, Realty Income has made 561 consecutive monthly dividend payments, totaling $4.6 billion.
2. Chatham Lodging Trust
Chatham Lodging Trust (NYSE:CLDT) is a REIT that invests in upscale, extended-stay hotels and premium-branded, select-service hotels. Headquartered in West Palm Beach, Florida, the company owns interests in 133 hotels, totaling 18,210 rooms in 15 states and the District of Columbia.
Note that Chatham Lodging Trust is not a hotel developer. Instead, it focuses on acquiring hotel properties at prices below replacement cost in markets that have strong demand generators. Moreover, the company looks to acquire properties that are believed to be under managed or undercapitalized. When deemed appropriate, Chatham also employs value-added strategies such as rebranding, renovating, and changing management to improve returns on invested capital.
As a REIT, Chatham is not allowed to operate its hotels, but the company proactively manages its third-party hotel managers to maximize hotel operating performance.
One of the strengths of this hotel REIT is its premium brands. A significant portion of Chatham’s portfolio consists of hotels in the upscale extended stay segment, including brands such as “Homewood Suites by Hilton,” “Residence Inn by Marriott,” and “Hyatt House.”
Chatham stock hasn’t really been a hot commodity, tumbling nine percent in the past 12 months. But the company’s business has been solid. In particular, Chatham’s operating results in the most recent quarter were much better than its guidance, with adjusted funds from operations per share improving five percent year-over-year. (Source: “Chatham Lodging Trust Announces Fourth Quarter 2016 Results,” Chatham Lodging Trust, February 22, 2017.)
For income investors, the number one reason to own this REIT is its dividends. Paying $0.11 per share each month, Chatham Lodging Trust is yielding a very impressive 6.81%. The company has also raised its payout in each of the last six years. Investors of this hotel REIT may be rewarded with another dividend hike in the next month of two.
3. EPR Properties Real Estate Trust
EPR Properties Real Estate Trust (NYSE:EPR) is a REIT that is kind of unique. Usually, a REIT is either a specialized one (like Chatham Lodging Trust) or a diversified one (like Realty Income). But EPR Properties allows investors to have the benefits of both. It maintains a specialized orientation, complemented by diversification across and within segments.
EPR Properties invests in three main segments: Entertainment, Recreation, and Education. Together, these three segments account for 98% of the company’s net operating income.
EPR Properties was founded in 1997 and is headquartered in Kansas City, Missouri. Today, it has over 290 locations spread across 41 states with 250 tenants. The value of the company’s investment portfolio is over $5.0 billion.
EPR Properties is one of the top monthly dividend stocks in today’s market. The company’s currently pays $0.34 per share on a monthly basis, translating to a handsome annual dividend yield of 5.58%. Over the past six years, EPR has raised its payout at an annual rate of seven percent.
The REIT also excels at total shareholder return, which includes stock price appreciation, dividends, and buybacks. In the past 10 years, EPR Properties has generated 142.02% of total returns to shareholders, which outperformed both the Russell 1000 Index (98.34%) and MSCI U.S. REIT Index (62.29%).
Financials seem to be solid as well. In the fourth quarter of 2015, EPR generated $130.8 million of total revenue, representing a 17% increase year-over-year. AFFO increased 14.1% year-over-year to $80.7 million. (Source: “EPR Properties Reports Fourth Quarter and 2016 Year-End Results,” EPR Properties Real Estate Trust, February 28, 2017.)
With solid operations and a strong investment portfolio, EPR Properties is worth considering or investors searching for monthly dividend stocks.
4. LTC Properties Inc
As income investors, it’s important to have a portfolio that can generate recession-proof income. Among the monthly dividend stocks in the market, there is one specific group of companies that are known for rewarding income investors through thick and thin: healthcare REITs.
The idea is that demand for healthcare and assisted living is relatively inelastic to how the overall economy is doing. During an economic downturn, consumers may not buy as many new cars as when everything is booming, but those that need healthcare will likely still seek it. Add in the fact that more baby boomers are entering their golden years and healthcare REITs are set to prosper.
LTC Properties Inc (NYSE:LTC) is a real estate investment trust specializing in seniors housing and healthcare properties. Headquartered in Westlake Village, California, the company’s portfolio includes more than 200 assisted living, memory care, post-acute/skilled nursing, and range-of-care properties in 30 states with 35 operating partners.
The reason to own LTC Properties is its generous dividends. The company switched to paying monthly dividends in 2005 and has increased its payout by 73% since then. Paying $0.19 per share every month, LTC stock has an annual dividend yield of 4.79%. (Source: “Dividends,” LTC Properties Inc, last accessed March 30, 2017.)
5. Main Street Capital Corporation
Rounding off the list of monthly dividend stocks to own in April is Main Street Capital Corporation (NYSE:MAIN). Main Street is a business development company that provides long-term debt and equity capital to lower-middle-market companies and debt capital to middle-market companies.
The company’s strategy is to provide “one-stop” financing alternatives within its lower-middle-market portfolio. Main Street’s investments are typically made into support management buyouts, recapitalizations, growth financings, refinancings, and acquisitions of companies that operate in diverse industry sectors.
Main Street has been rewarding investors with monthly dividends since September 2008. Since then, its monthly payout has increased by nearly 50%. Trading at $38.26 apiece, the company has an annual dividend yield of 5.8%.
One reason why investors may want to consider Main Street stock in April is the prospect of collecting a special dividend. Due to capital gains on its equity investments, Main Street has been paying special dividends on a semi-annual basis, with announcement dates in April and October. Investors in this BDC could see another special dividend announcement sometime this month.