7 Monthly Dividend Stocks That Pay the Bills

Dividend Stocks

While wagering on the next big thing always drives new players to the financial markets, as you grow in your investment journey, you’ll realize the importance of diversification. Specifically, your “active” plays will likely generate the most gains, but you’ll often find yourself with duds. On the other hand, monthly dividend stocks can give you a consistent stream of passive income.

In today’s hyper-competitive and hyper-superficial world, everyone’s pushing to be alpha. It’s nice for a while but you’ll soon realize that there’s always somebody out there who’s bigger, faster and stronger. So it is with the equities market and folks waxing poetic about seeking alpha – if it were so easy, wouldn’t it be called securing alpha? This is where monthly dividend stocks enter the frame.

To be clear, no such thing as a risk-free investment. But pick the right monthly dividend stocks and you’ll probably have a higher chance of accruing something. On the other hand, if you’re constantly seeking speculative growth names, chances are that over time, you’ll end up with plenty of red ink in your portfolio. In that case, you would have been better off investing in dividend-bearing companies.

But monthly dividend stocks provide another element to the passive income proposition. Usually, dividends are paid out on a quarterly basis. However, our bills come due monthly. Therefore, a company that pays out 12 times a year is much more aligned with our daily lives. Here are some names to consider to add some passivity to your portfolio:

  • Agree Realty Corporation (NYSE:ADC)
  • AGNC Investment (NASDAQ:AGNC)
  • Dynex Capital (NYSE:DX)
  • Armour Residential REIT (NYSE:ARR)
  • Broadmark Realty Capital (NYSE:BRMK)
  • Pembina Pipeline (NYSE:PBA)
  • Cross Timbers Royalty Trust (NYSE:CRT)

Before we dive in, I put in mostly high-yielding monthly dividend stocks. As with anything in life, a higher reward potential usually means greater risk. While you can go with safer options, these are the companies that truly can help pay the bills.

Monthly Dividend Stocks: Agree Realty Corporation (ADC)

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When the novel coronavirus first touched down on American shores, the quickly unraveling crisis devastated the retail sector. With several state governments imposing a shutdown on non-essential activities, many shopping centers suffered badly. You’d expect the fallout to hit Agree Realty Corp. particularly hard, given that it specializes in such businesses. Fundamentally, though, ADC stock has weathered the storm quite well.

In 2020, Agree rang up top-line sales of $248.6 million, up almost 33% from the prior year’s tally. Net income was $91.4 million, up 14% from 2019’s result. Part of its success is due to its wide coverage area, with properties in every state in the continental U.S. except Montana, Wyoming and Vermont (but they don’t matter so it’s fine – I’m kidding, please don’t shoot me).

Moreover, Agree’s clientele heavily features essential businesses, such as grocery stores, auto parts and repair stores and big-box retailers. Therefore, ADC stock performed fairly well based on the circumstances.

Best of all, Agree is one of the monthly dividend stocks with a forward annualized dividend yield of about 3.72%.

AGNC Investment (AGNC)

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I must admit that I’m torn about AGNC Investment. On the positive end of the spectrum, AGNC is not only an intriguing example among monthly dividend stocks but it’s also one of the highest yielding. According to Dividend.com, AGNC stock has a forward annualized yield of about 8.58%. That’s a juicy figure but is it viable for the long haul?

That’s where the risky side of the picture comes into view. Billed as an internally managed mortgage real estate investment trust, it predominantly focuses on agency mortgage-backed securities and not actual properties. If you lived through the last housing crisis or watched the movie The Big Short, you tend to have a guttural reaction to the acronym MBS – and I’m not talking about Mohammed bin Salman.

Come to think of it, why is MBS always the acronym of controversy?

Anyways, AGNC stock carries significant risk, there’s no doubt about it. However, the agency MBS refers to is entities such as Fannie Mae and Freddie Mac. This might be enough for intrepid investors who are dead set on seeking monthly dividend stocks.

Dynex Capital (DX)

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Another internally managed mortgage REIT, Dynex Capital is perfect for those who want extra oomph in their monthly dividend stocks. Of course, higher yields almost always mean higher risk. Forget Dynex’s well-manicured marketing statements regarding management of “a diversified, high-quality, leveraged fixed-income portfolio.” I’m sure the team does a fine job. However, I’m just giving it to you straight – if you want stability, DX stock probably isn’t your first pick.

If you want robust monthly returns, you’re speaking the Dynex language. According to Dividend.com, DX stock has a forward annualized yield of about 8.4%, which is a healthy figure. To get this level of passive income, Dynex focuses mostly on U.S. government-backed agency MBS. However, the company also delves into non-agency mortgage debt, which is the wild west of the debt markets.

A word of caution – just because a government entity backs an MBS doesn’t make it safe. For instance, note that real estate loans have been declining while prices in several metropolitan areas have been rising. This doesn’t appear to make too much sense, which may pose problems for mortgage-related REITs.

Monthly Dividend Stocks: Armour Residential REIT (ARR)

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If you really want to dial up the risk to get maximum reward from your monthly dividend stocks, Armour Residential REIT makes a strong case for itself. Featuring an approximately 9.84% forward annualized yield, this stat alone is going to draw some eyeballs for ARR stock. Nevertheless, you’re going to want to do your homework, as in tons of due diligence.

First off, ARR stock has been performing well as of late, up 27% over the trailing six months. But compared to where shares were prior to the pandemic, Armour is down about 40%. Second, while the company suffered a hefty revenue loss in 2020, that was understandably due to a subterranean first quarter in 2020. Over subsequent quarters, Armour has been steadily gaining traction.

Like the other REITs, ARR is tied mostly to government-backed mortgage debt. But what you have to watch out for is that Armour is also exposed to either hybrid adjustable rate or adjustable rate loans. Because of the fragile nature of our economic recovery – along with a huge conflict brewing with China – adjustable rate anything is a serious concern.

Broadmark Realty Capital (BRMK)

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A hard money lender specializing in construction loans for real estate investors and developers, Broadmark Realty Capital also offers commercial and land loan services. BRMK stock will be an enticing name for those seeking out monthly dividend stocks as it features a forward annualized dividend yield of about 8%. But as I’ve mentioned, high yields often entail high risk. So what’s the deal with Broadmark?

On the positive side of the spectrum, Broadmark has exposure to multiple states in the Sunbelt, such as Texas and Florida. Its reach also extends to states that are popular with millennials, such as business-friendly Utah and the always-happening Colorado. Indeed, BRMK stock should benefit as the states where the underlying company does business represent the forefront of the demographic migration, which the novel coronavirus helped accelerate due to work-from-home initiatives.

On the not-so-great side, broader economic viability is a major question hanging over BRMK stock. As you might imagine, construction projects aren’t particularly robust during recessions. Further, evidence shows that construction spending for commercial projects has softened because of the pandemic.

Pembina Pipeline (PBA)

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A Canadian company that specializes in transportation and storage infrastructure for the oil and natural gas industry, Pembina Pipeline suffered a catastrophic loss when the coronavirus hit North America. With lockdowns becoming the favored mitigation protocol, demand for oil simply cratered. At one point, albeit very briefly, oil prices dropped below zero. That did nothing to help people’s perception of PBA stock.

Now, the narrative has shifted much more favorably. On a year-to-date basis, PBA stock is up almost 21%. Further, new investors are undoubtedly keeping tabs on its forward annualized dividend yield of about 7.15%. While it’s not quite as high as the other monthly dividend stocks on this list, it’s arguably a tad less risky. Once the economy fully reopens, people will need crude oil products – they don’t absolutely need home mortgages right away.

On the less-encouraging side, we don’t really know what’s going to happen with this crisis, particularly with multiple Covid-19 strains flying about. If we have another surge of this awful pandemic, Pembina and other oil-related investments could tumble again.

Monthly Dividend Stocks: Cross Timbers Royalty Trust (CRT)

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As the name suggests, Cross Timbers Royalty Trust conveys net profit interest in royalty and overriding royalty interest properties of oil projects located in Texas, Oklahoma and New Mexico. Similar to Pembina Pipeline above, Cross Timbers took a beating in early 2020 when the Covid-19 crisis struck us. However, unlike other oil-related investments, CRT stock made a relatively quick comeback.

Over the trailing year, Cross Timbers shares are up 72%. Despite the robust gains, CRT provides solid passive income relative to many other monthly dividend stocks, with a forward annualized yield of about 5.19%. As I mentioned earlier, CRT stock could represent an excellent contrarian take on a full reopening. Moreover, the Suez Canal crisis involving a stuck cargo ship could still see oil prices rise based on supply chain disruptions.

However, it’s important that we see substantive and holistic economic improvement – not just for white-collar workers. If we don’t get such a recovery, that might engender social fissures, perhaps a repeat of last year’s summer of unrest. I don’t think that would go over too well for CRT or most other publicly traded companies.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.