12 Best Monthly Dividend Stocks and Funds to Buy for 2022
Your bills come monthly. Why not your dividend checks? These are some of 2022's best monthly dividend stocks and funds for easier income planning.
For all the changes we've experienced in recent years, some things remain regrettably the same. We all have bills to pay, and those bills generally come monthly. Whether it's your mortgage, your car payment or even your regular phone and utility bills, you're generally expected to pay every month.
While we're in our working years, that's not necessarily a problem, as paychecks generally come every two weeks. And even for those in retirement, Social Security and (if you're lucky enough to have one) pension payments also come on a regular monthly schedule. But unfortunately, it doesn't work that way in our investment portfolios.
That's where monthly dividend stocks come into play.
Dividend-paying stocks generally pay quarterly, and most bonds pay semiannually, or twice per year. This has a way of making portfolio income lumpy, as dividend and interest payments often come in clusters.
Well, monthly dividend stocks can help smooth out that income stream and better align your inflows with your outflows.
"We'd never recommend buying a stock purely because it has a monthly dividend," says Rachel Klinger, president of McCann Wealth Strategies, an investment adviser based in State College, Pennsylvania. "But monthly dividend stocks can be a nice addition to a portfolio and can add a little regularity to an investor's income stream."
Today, we're going to look at 12 of the best monthly dividend stocks and funds to buy as we get ready to start 2022. You'll see some similarities across the selections as monthly dividend stocks tend to be concentrated in a small handful of sectors such as real estate investment trusts (REITs), closed-end funds (CEFs) and business development companies (BDCs). These sectors tend to be more income-focused than growth-focused and sport yields that are vastly higher than the market average.
But in a market where the yield on the S&P 500 is currently 1.25%, that's certainly welcome.
The list isn't particularly diversified, so it doesn't make a complete portfolio. In other words, you don't want to overload your portfolio with monthly dividend stocks. But they do allow exposure to a handful of niche sectors that add some income stability, so take a look and see if any of these monthly payers align with your investment style.
Data is as of Nov. 21. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Fund discount/premium to NAV and expense ratio provided by CEF Connect.
- Market value: $40.1 billion
- Dividend yield: 4.2%
Perhaps no stock in history has been more associated with monthly dividends than conservative triple-net retail REIT Realty Income (O, $70.91). The company went so far as to trademark the "The Monthly Dividend Company" as its official nickname.
Realty Income is a stock, of course, and its share price can be just as volatile as any other stock. But it's still as close to a bond as you're going to get in the stock market. It has stable recurring rental cash flows from its empire of more than 7,000 properties spread across roughly 650 tenants.
Realty Income focuses on high-traffic retail properties that are generally recession-proof and, perhaps more importantly, "Amazon.com-proof." Perhaps no business is completely free of risk of competition from Amazon.com (AMZN) and other e-commerce titans, but Realty Income comes close.
Its largest tenants include 7-Eleven, Walgreens Boots Alliance (WBA), FedEx (FDX) and Home Depot (HD), among others. The portfolio had relatively high exposure to gyms and movie theaters, which made the pandemic painful. But as the world gets closer to normal with every passing day, Realty Income's COVID-19 risk gets reduced that much more.
At current prices, Realty Income yields about 4.2%. While that's not a monster yield, remember that the 10-year Treasury yields only 1.6%.
It's not the raw yield we're looking for here, but rather income consistency and growth. As of this writing, Realty Income has made 616 consecutive monthly dividend payments and has raised its dividend for 96 consecutive quarters – making it a proud member of the S&P 500 Dividend Aristocrats. Since going public in 1994, Realty Income has grown its dividend at a compound annual growth rate of 4.5%, well ahead of inflation.
- Market value: $7.6 billion
- Dividend yield: 3.4%
Realty Income was pretty darn close to "Amazon.com-proof." But fellow monthly payer STAG Industrial (STAG, $42.77) proactively benefits from the rise of internet commerce.
STAG invests in logistics and light industrial properties. You know those gritty warehouse properties you might see near the airport with 18-wheelers constantly coming and going? That's exactly the kind of property that STAG buys and holds.
It's a foregone conclusion that e-commerce is growing by leaps and bounds, and STAG is positioned to profit from it. Approximately 40% of STAG's portfolio handles e-commerce fulfillment or other activity, and Amazon.com is its largest tenant.
E-commerce spiked during the pandemic for obvious reasons. As stores have reopened, the effects of that spike have dissipated somewhat, but the trend here is clear. We're making a larger percentage of our purchases online.
Yet there's still plenty of room for growth. As crazy as this might sound, only about 15% of retail sales are made online, according to Statista. Furthermore, the logistical space is highly fragmented, and Stag's management estimates the value of their market to be around $1 trillion. In other words, it's unlikely STAG will be running out of opportunities any time soon.
STAG isn't sexy. But it's one of the best monthly dividend stocks to buy in 2022, with a long road of growth in front of it. And its 3.4% yield is competitive in this market.
- Market value: $838.2 million
- Dividend yield: 6.7%
For another gritty industrial play, consider the shares of Gladstone Commercial (GOOD, $22.49). Gladstone Commercial, like STAG, has a large portfolio of logistical and light industrial properties. Approximately 48% of its rental revenues come from industrial properties with another 48% coming from office properties. The remaining 4% is split between retail properties, at 3%, and medical offices at 1%.
It's a diversified portfolio that has had little difficulty navigating the crazy volatility of the past few years. As of Sept. 30, 2021, the REIT had a portfolio of 127 properties spread across 27 states and leased to 109 distinct tenants. In management's own words, "We have grown our portfolio 18% per year in a consistent, disciplined manner since our IPO in 2003. Our occupancy stands at 97.7% and has never dipped below 95.0%.”
That's not a bad run.
Gladstone Commercial has also been one of the most consistent monthly dividend stocks, paying one uninterrupted since January 2005. GOOD currently yields an attractive 6.7%.
- Market value: $3.7 billion
- Dividend yield: 6.1%
The COVID-19 pandemic was rough on a lot of landlords. But few were as uniquely battered as EPR Properties (EPR, $49.21). EPR owns a diverse and eclectic portfolio of movie theaters, amusement parks, ski parks, "eat and play" properties like Topgolf, and a host of others.
EPR specializes in experiences over things … which is just about the worst way to be positioned at a time when social distancing was the norm. Essentially every property EPR owned was closed for at least a time, and crowds still haven't returned to pre-COVID levels across much of the portfolio.
But the key here is that the worst is long behind EPR Properties, and the more normal life becomes, the better the outlook for EPR's tenants.
EPR was a consistent dividend payer and raiser pre-pandemic. But with its tenants facing an existential crisis, the REIT eliminated its dividend in 2020. With business conditions massively improving in 2021, EPR reinstated its monthly dividend in July, and the shares now yield an attractive 6.1%.
If you believe in life after COVID, EPR is one of the best monthly dividend stocks to play it.
- Market value: $1.3 billion
- Dividend yield: 6.7%
For one final "traditional" REIT, consider the shares of LTC Properties (LTC, $34.24).
LTC faces some short-term headwinds due to the lingering effects of the pandemic, but its longer-term outlook is bright. LTC is a REIT with a portfolio roughly split equally between senior living properties and skilled nursing facilities.
Needless to say, COVID-19 was hard on this sector. Nursing homes were particularly susceptible to outbreaks, and nursing home residents were at particularly high risk given their age.
Senior living properties are different in that the tenants are generally younger and live independently without medical care. But a lot of would-be tenants were reluctant to move out of their homes and into a more densely populated building during a raging pandemic. And many still are.
These lingering effects won't disappear tomorrow. But ultimately, senior living facilities offer an attractive, active lifestyle for many seniors, and that hasn't fundamentally changed. And home care might be a viable option for many seniors in need of skilled nursing. Ultimately there comes a point where there are few alternatives to the care of a nursing home.
Importantly, the longer-term demographic trends here are all but unstoppable. The peak of the Baby Boomer generation are in their early-to-mid-60s today, far too young to need long-term care. But over the course of the next two decades, demand will continue to build as more and more boomers age into the proper age bracket for these services.
At 6.7%, LTC is one of the higher-yielding monthly dividend stocks on this list.
- Market value: $8.4 billion
- Dividend yield: 9.0%
AGNC Investment (AGNC, $15.98) is a REIT, strictly speaking, but it's very different from the likes of Realty Income, STAG or any of the others covered on this list of monthly dividend stocks. Rather than own properties, AGNC owns a portfolio of mortgage securities. This gives it the same tax benefits of a REIT – no federal income taxes so long as the company distributes at least 90% of its net income as dividends – but a very different return profile.
Mortgage REITs (mREITs) are designed to be income vehicles with capital gains not really much of a priority. As such, they tend to be monster yielders. Case in point: AGNC yields 9%.
Say "AGNC" out loud. It sounds a lot like "agency," right?
There's a reason for that. AGNC invests exclusively in agency mortgage-backed securities, meaning bonds and other securities issued by Fannie Mae, Freddie Mac, Ginnie Mae or the Federal Home Loan Banks. This makes it one of the safest plays in this space.
And here's a nice kicker: AGNC almost always trades at a premium to book value, which makes sense. You and I lack the capacity to replicate what AGNC does in house and lack access to financing on the same terms. Those benefits have value, which show up in a premium share price. Yet today, AGNC trades at a 9% discount to book value. That's a fantastic price for the stock in this space.
- Market value: $640.6 million
- Dividend yield: 8.9%
Along the same lines, let's take a look at Dynex Capital (DX, $17.47). Like AGNC, Dynex is a mortgage REIT, though its portfolio is a little more diverse. Approximately 85% of its portfolio is invested in agency residential mortgage-backed securities – bonds made out of the mortgages of ordinary Americans – but it also has exposure to commercial mortgage-backed securities and a small allocation to non-agency securities.
It's important to remember that the mortgage REIT sector was eviscerated by the COVID-19 bear market. When the world first went under lockdown, it wasn't immediately clear that millions of Americans would be able to continue paying their mortgages, which led investors to sell first and ask questions later. In the bloodbath that followed, many mortgage REITs took catastrophic losses and some failed altogether.
Dynex is one of the survivors. And frankly, any mortgage REIT that could survive the upheaval of 2020 is one that can likely survive the apocalypse. Your risk of ruin should be very modest here.
Dynex trades at a slight discount to book value and sports a juicy 8.9% yield. We could see some volatility in the space if the Fed ever gets around to raising rates, but for now this looks like one of the best monthly dividend stocks to buy if you're looking to really pick up some yield.
- Market value: $1.3 billion
- Dividend yield: 8.6%
Broadmark Realty (BRMK, $9.75) isn't a "mortgage REIT," per se, as it doesn't own mortgages or mortgage-backed securities. But it does something awfully similar. Broadmark manages a portfolio of deed of trust loans for the purpose of funding development or investment in real estate.
This is a little different than AGNC or Dynex. These mortgage REITs primarily trade standardized mortgage-backed securities. Broadmark instead deals with the less-liquid world of construction loans.
Still, BRMK runs a conservative book. The weighted average loan-to-value of its portfolio is a very modest 60%. In other words, Broadmark would lend no more than $60,000 for a property valued at $100,000. This gives the company a wide margin of error in the event of a default by a borrower.
At current prices, Broadmark yields an attractive 8.6%. The company initiated its monthly dividend in late 2019 and sailed through the pandemic with no major issues.
Main Street Capital
- Market value: $3.2 billion
- Dividend yield: 5.5%
We know that the pandemic hit Main Street a lot harder than Wall Street. It is what it is.
But what about business development companies. This is where the proverbial Main Street means the proverbial Wall Street. BDCs provide debt and equity capital mostly to middle-market companies. These are entities that have gotten a little big to get financing from bank loans and retained earnings but aren't quite big enough yet to warrant a stock or bond IPO. BDCs exist to bridge that gap.
The appropriately named Main Street Capital (MAIN, $46.61) is a best-in-class BDC based in Houston, Texas. The last two years were not particularly easy for Main Street's portfolio companies, as many smaller firms were less able to navigate the lockdowns. But the company persevered, and its share price recently climbed above its pre-pandemic highs.
Main Street has a conservative monthly dividend model in that it pays a relatively modest monthly dividend, but then uses any excess earnings to issue special dividends twice per year. This keeps Main Street out of trouble and prevents it from suffering the embarrassment of a dividend cut in years where earnings might be temporarily depressed.
As far as monthly dividend stocks go, Main Street's regular payout works out to a respectable 5.6%, and this does not include the special dividends.
- Market value: $3.5 billion
- Dividend yield: 8.0%
For another high-yielding, monthly-paying BDC, consider the shares of Prospect Capital (PSEC, $8.97).
Like most BDCs, Prospect Capital provides debt and equity financing to middle-market companies. The company has been publicly traded since 2004, so it's proven to be a survivor in what has been a wildly volatile two decades.
Prospect Capital is objectively cheap, as it trades at just 89% of book value. Book value itself can be somewhat subjective, of course. But the 11% gives us a good degree of wiggle room. It's safe to say the company, even under conservative assumptions, is selling for less than the value of its underlying portfolio. It also yields a very healthy 8.0%.
As a general rule, insider buying is a good sign. When the management team is using their own money to buy shares, that shows a commitment to the company and an alignment of interests. Well, over the course of the past two years, the management team bought more than 29 million PSEC shares combined. These weren't stock options or executive stock grants. These are shares that the insiders bought themselves in their brokerage accounts.
Ecofin Sustainable and Social Impact Term Fund
- Assets under management: $269.7 million
- Distribution Rate: 6.0%*
- Discount/premium to NAV: -14.3%
- Expense ratio: 2.28%**
There's something to be said for orphan stocks. There are certain stocks or funds that simply don't have a "normal" go-to buying clientele.
As a case in point, consider the Ecofin Sustainable and Social Impact Term Fund (TEAF, $15.00). This is a fund that straddles the divide between traditional energy infrastructure like pipelines and green energy projects like solar panels. It also invests in "social impact" sectors like education and senior living. Approximately 68% of the portfolio is dedicated to sustainable infrastructure with energy infrastructure and social impact investments making up 13% and 19%, respectively.
But this isn't the only way the fund is eclectic. It's also a unique mixture of public and private investments. 52% is invested in publicly traded stocks with the remaining 48% invested in private, non-traded companies.
Is it any wonder that Wall Street has no idea what to do with this thing?
This lack of obvious buying clientele helps to explain why the fund trades at a large discount to net asset value of 15%.
That's okay. We can buy this orphan stock, enjoy its 6% yield, and wait for that discount to NAV to close. And close it will. The fund is scheduled to liquidate in about 10 years, meaning the assets will be sold off and cash will be distributed to investors. Buying and holding this position at a deep discount would seem like a no-brainer of a strategy.
* Distribution rate is an annualized reflection of the most recent payout and is a standard measure for CEFs. Distributions can be a combination of dividends, interest income, realized capital gains and return of capital.
** Includes 1.50% in management fees, 0.28% in other expenses and 0.50% in interest expenses.
BlackRock Municipal 2030 Target Term
- Assets under management: $1.9 billion
- Distribution rate: 2.9%
- Discount/premium to NAV: -4.6%
- Expense ratio: 1.01%**
We'll wrap this up with another term fund, the BlackRock Municipal 2030 Target Term Fund (BTT, $25.49).
As its name suggests, the fund is designed to be liquidated in 2030, roughly eight years from now. A lot can happen in eight years, of course. But buying a portfolio of safe municipal bonds trading at a more than 4% discount to book value would seem like a smart move.
The biggest selling point of muni bonds is, of course, the tax-free income. The bond interest isn't subject to federal income taxes. And while city, state and local bonds aren't "risk free" – only the U.S. government can make that claim – defaults and financial distress in this space is rare. So, you're getting a safe, tax-free payout. That's not too shabby.
As of Oct. 29, 2021, BTT's portfolio was spread across 633 holdings with its largest holding accounting for about 3.4%.
BTT sports a distribution rate of 2.9%. That's not "high yield" by any stretch of the imagination. But remember, the payout is tax-free, and if you're in the 37% tax bracket, your tax-equivalent yield is a much more palatable 4.6%.
** Includes 0.40% in management fees, 0.61% in interest and other expenses