3 Actions That Cut Your Check Every Month

Dividends are great, especially if you need the income to cover your current living expenses. But the way dividends are paid is not always convenient. Most dividend stocks pay only once a quarter. Most likely, you pay your bills monthly. It would be nice if this money were coming in at the same rate as it was going out.

Although relatively uncommon, there are some stocks that pay their dividends monthly rather than quarterly. Here’s a closer look at three of the best that you may want to add to your portfolio.

Real estate income

If you’re looking for a stock that pays a recurring monthly dividend, it makes sense to own a stock in a company that charges its clients monthly.

Come in Real estate income (NYSE: O). It is a real estate investment trust (REIT). That just means he owns real estate for rent.

There are all kinds of REITs, specializing in everything from shopping malls to apartment buildings to hotels to office space. Realty Income’s focus is retail. It owns 15,450 different retail properties, of which 98.8% are currently leased to more than 1,500 different consumer-facing companies. Its top tenants include right now general dollar, Walgreensand The dollar treebut Walmart7-Eleven and FedEx are also key tenants.

On the surface, it’s a troubling specialty for potential shareholders. The retail industry is supposedly fighting for its life, fending off the advent of online shopping.

However, some key players in this market will always remain in real form, many of them Realty Income tenants.

That’s what the numbers suggest, anyway. Not only is almost all of this REIT’s portfolio currently rented out despite the economic turmoil, but it has managed to pay a dividend every month since its inception in 1969. Indeed, it has not only managed to increase its dividend payments for the whole year every year in the past. 30 years old, but has increased his monthly payment every three months for the past 107 quarters. Not bad.

Newcomers will step into Realty Income while its forward yield is just over 5%.

Industrial deer

Like real estate income, Industrial deer (NYSE: STAG) is a REIT. Its forward yield of 3.7% is also in line with Realty Income’s, even if measurably lower. It it is different from Real Estate Income in one key way. While Realty Income focuses on retail properties, Stag Industrial — as the name suggests — mostly owns industrial rental properties.

The story continues

The term “industrial” might be a bit misleading here. The company does not own a bunch of factories or manufacturing units. Most of its business and its tenants are consumer oriented. Amazon is its biggest tenant, for example, mostly leasing warehouse space. The Coca-Cola Company is another major tenant, along with FedEx. Most of its tenants use the space leased from Stag Industrial for logistics, warehousing, delivery and storage purposes.

Whatever the case, it works. By the middle of this year, more than 97 percent of the 114.1 million leasable square feet were leased — and at high prices. This REIT generates plenty of income to cover its ever-increasing dividend payments. Although at a sometimes painfully slow pace, Stag’s has increased its dividend payout every year since 2011. This year should be no exception.

There’s another great reason to consider entering an Industrial Stag participation…one that’s rarely advertised. That is, while REITs are suitable for paying dividends, Stag also aims to drive significant appreciation in its share price. Much of this growth will come from sales of previously acquired properties that have been developed, improved or increased in value or are no longer part of its portfolio.

The strategy doesn’t always work. However, it works more often than not. Deer quotas have increased nearly 100% over the past decade due to steady (though volatile) long-term progress.

AGNC Investments

Finally, add AGNC Investments (NASDAQ: AGNC) to your list of tickers that pay a monthly dividend.

Yes, it’s another REIT, though still different from Stag or Realty Income. AGNC Investment is a mortgage REIT, meaning it buys bundles of mortgage loans — which essentially trade as bonds — facilitated by government agencies such as Federal National Mortgage Association (Fannie Mae). Ciculia? It borrows money to make these purchases, paying shareholders most of the difference between what it takes in each month and what goes out.

It sounds strange at first…paying interest on borrowed money to earn interest on borrowed money. Surprisingly enough, though, the pattern usually works. This is because the interest costs on short-term funds borrowed to buy bundles of long-term loans are usually lower than the interest earned on the bundled loans themselves. These are also highly leveraged purchases, so even the relatively small difference between AGNC’s borrowing costs and the property’s return on the mortgages it owns is effectively magnified.

Usually, but not always.

Since mid-2022, long-term interest rates have fallen below short-term rates. You’ve probably heard this rare phenomenon called the inverted yield curve. It often happens in anticipation of economic or market weakness, marked by investors exiting stocks and showing up in something seemingly safer.

Mortgage REITs like AGNC Investment can usually shrug if the yield curve doesn’t stay inverted for too long. This curve remained inverted for several years, wreaking havoc on AGNC’s business model in the meantime. This is the main reason why this stock has performed so poorly since then.

The yield curve is no longer inverted, and if the impending rate cuts work as expected, the yield curve will remain inverted as mortgage demand is reignited. That is exactly what AGNC and its shareholders want to see.

AGNC Investment’s projected dividend yield is an incredible 14% right now, but don’t get too excited. This could easily change as the economic context evolves. This is why this REIT should not be your first or only monthly dividend stock.

If you have room for a little uncertainty and inconsistency among your dividend-paying holdings, this above-average return may be worth the risk.

Should you invest $1,000 in Real Estate Income right now?

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James Brumley has positions in Coca-Cola. The Motley Fool has positions in and recommends FedEx, Realty Income, Stag Industrial and Walmart. The Motley Fool has a disclosure policy.

3 Stocks That Make You a Check Every Month was originally published by The Motley Fool