Dividends are sacred to investors. Picking the best long-term stocks gives you a sense of security with a steady income. Dividends provide extra income whatever your professional and personal situation, as well as protection against market volatility.
The supporting chart shows that investing in stocks for the long term is clearly profitable. It makes you wonder why you would keep your money in risk-free investments that earn nothing. With regular dividends, you benefit from the power of compound interest, which lets you grow your capital with peace of mind.
Listed companies choose to pay dividends on an annual, semi-annual or quarterly schedule, but some of them opt for monthly payouts. These are known as monthly dividend stocks.
Stocks that pay a dividend every month offer more regular income. The more often you receive dividends, the sooner you can reinvest them to buy more shares and therefore generate more income. They can suit certain types of investors, such as retirees.
However, you can’t have your cake and eat it too. We will see that monthly dividend stocks are not without risk.
If you want to learn more before taking the plunge, it makes sense to first review how they differ from the usual norm in the stock market. Next, we will look at where to find them and in which sectors. Third, we will cover the opportunities and risks of investing in monthly dividend stocks. Finally, we will set out the criteria for finding the best in class.
As a bonus, and without it being a buy recommendation, we will reveal the top 5 monthly dividend stocks of recent years.
Monthly Dividend Stocks – Key Features to Know
In the United States and Canada, most companies pay a dividend every quarter. In Europe, it varies from country to country. In France, annual payouts are the norm. In Spain, the Netherlands and the United Kingdom, companies favor a semi-annual dividend schedule.
Let’s be frank: monthly dividend stocks are rare. There are roughly fifty of them among more than 630,000 stocks worldwide.
First feature: they are concentrated in a few sectors. Second feature: most of them yield more than the S&P 500 average and the central banks’ 2% inflation target. Third feature: because the dividend goes ex every month, the share price is mechanically reduced by the dividend amount each month, without this calling the company’s underlying fundamentals into question.
Monthly Dividend Stocks – Which Countries Are They In?
You will only find them in North America: the United States and Canada. Don’t bother looking for any in Europe. As a result, there are no monthly dividend stocks eligible for a French PEA. You can, however, invest in these stocks with CFDs through an online broker such as eToro.
Which Sectors Are They In?
About fifty North American companies pay a monthly dividend. They are concentrated in a handful of sectors, including REITs (Real Estate Investment Trusts), finance, energy, utilities and telecoms.
REITs
Most monthly dividend stocks are REITs. Created in 1960 in the United States, these are companies that own and manage real estate. They earn income by renting out their properties. REITs have a specific tax status that requires them to pay out 90% of their income to shareholders as dividends.
It makes sense that some REITs pay monthly dividends to their shareholders, since they collect their income as monthly rent. By property type, you will find office buildings, shopping centers, apartments, hotels, leisure facilities, warehouses and more.
Another category of REIT pays monthly dividends: mortgage REITs. These companies do not own physical properties. They lend money directly to property owners by issuing mortgages, or indirectly by buying existing loans or mortgage-backed securities.
To pay dividends, mortgage REITs earn income from the interest received on mortgage loans or from investments in real-estate-backed financial instruments. You might think they work much like banks, except that mortgage REITs do not hold customer deposits.
Mortgage REITs generally use financial leverage to earn a margin on their loans and pay a high-yield dividend.
For these reasons, mortgage REITs are sensitive to interest rate changes. If rates rise, their margin shrinks relative to their funding costs. If rates fall, borrowers may be tempted to refinance their loans more cheaply, which would reduce their yield.
So, as you will have gathered, it is better to invest in this type of REIT when interest rates are stable.
Finance
The finance sector is often sought after for its yields and its undervaluation relative to the market average. You can find companies paying a monthly dividend in segments such as:
BDCs (Business Development Companies). These are investment companies that invest in small and medium-sized businesses. They support them in their early growth phase by providing capital through equity, debt or other financial instruments. To benefit from an advantageous tax status, BDCs must hold at least 70% of their assets in private or public US companies with a market value below $250 million. Their business model is similar to that of mortgage REITs, except that BDCs have several sources of income.
CEFs (Closed-End Funds). These are funds with fixed capital, made up of shares traded on an exchange or over the counter. Like mutual funds, they are run by portfolio managers. However, once listed, a CEF has a fixed number of shares outstanding, which means it does not issue new capital or buy back shares. Like an individual stock, a CEF is bought and sold on the secondary market.
Banks are now regarded as slow-growth companies. Their growth potential matured during the 2000s, hence their interest in keeping shareholders loyal through a regular dividend. Most of them generally choose quarterly payouts, but there are a few rare birds in this segment that pay monthly.
Energy
In the energy sector, you often think of the majors such as ExxonMobil, Chevron, Royal Dutch Shell, BP and Total. You appreciate them for their attractive yields and their dividend growth track record over several decades. For example, ExxonMobil and Chevron have Dividend Aristocrat status, with more than 25 consecutive years of dividend increases.
If you are curious about this sector, there are a few companies that pay a dividend on a monthly basis. Most of them operate in oil and gas production. However, this is not without risk, as they are sensitive to changes in the oil price.
Utilities and Telecoms, Traditional High-Yield Sectors
Utilities and telecoms are traditionally mature sectors. It will be hard for you to make quick gains within a few months. Their dividend policy is aimed more at investors with a conservative risk profile. Companies in these sectors offer yields above the market average. They can provide protection against inflation and falling yields on risk-free investments (French Livret A and LDD savings accounts, government bonds).
They also benefit from high barriers to entry thanks to regulation, which supports recurring revenue and stable cash flow. You will find a few of them in the list of monthly dividend stocks, including a Canadian company that makes our top 5.
The Advantages of Receiving a Monthly Dividend
Is there a real difference between receiving a dividend monthly and receiving it quarterly? Take, for example, 1,000 shares of stock Y at $10 paying an annual dividend of $1.50 per share. That is equivalent to an annual yield of 15% (or 1.25% per month).
If the dividend is paid monthly and then reinvested in the stock itself, you collect $1,607.60 in dividends after one year. Thanks to compounding, your return on investment is 16.076%.
If the dividend is paid quarterly, the yield per payment is initially 3.75%. After one year, you collect $1,586.50 in dividends, for a return on investment of 15.865%.
Over the long term and with a large starting capital, monthly dividend stocks can deliver big returns on investment. This works if you are smart enough to pick the best in class.
The other advantage is that it feels like receiving a mini salary or extra income every month. That is no small thing given the rising cost of living and the unsustainability of today’s pension systems.
You might be celebrating, thinking this is the best investment idea of all time. But statistically and historically, monthly dividend stocks are more likely to cut or suspend their dividend than quarterly dividend stocks.
The Dangers of Monthly Dividend Stocks
After discovering their advantages, you might think at first glance that they are a safe haven for investing in the stock market. Unfortunately, the devil is in the details. A monthly dividend stock means the company has to dip into its cash every month to pay its shareholders. If the company runs into internal or external problems, this payout policy can stop overnight.
Note that most monthly dividend stocks are highly speculative. They operate in cyclical sectors (and are therefore sensitive to the economic environment) that are highly capital-intensive. This forces management to invest a lot of money in the business to generate profits. Their debt levels are above the market average.
They tend to pay dividends with a high payout ratio. The problem with a consistently high payout ratio is that, sooner or later, it can lead to a dividend cut or suspension. Why? Because the company will be more vulnerable in the event of a recession or an unforeseen event.
The Covid-19 crisis is a perfect example. Some monthly dividend stocks had to cut part of their payout to shareholders. With both a high payout ratio and high debt, a company does not have the financial strength to invest in its future growth. The rating agencies (Moody’s, Standard & Poor’s and Fitch) rightly do not make it easy for them to access capital on the financial markets, as their debt is rated below investment grade.
Now you are on your guard before walking into the lion’s den of monthly dividend stocks.
List of US and Canadian Monthly Dividend Stocks
Here is the summary list of monthly dividend stocks by sector
Agree Realty Corporation (industrial REIT)
American Finance Trust (retail REIT) – merged into Global Net Lease in 2023, no longer listed
AGNC Investment (mortgage REIT)
Apple Hospitality REIT (hotel and leisure REIT)
ARMOUR Residential REIT (mortgage REIT)
Grupo Aval Acciones y Valores (Finance)
Banco Bradesco (Finance)
Broadmark Realty Capital (mortgage REIT) – merged into Ready Capital in 2023, no longer listed
Chatham Lodging (hotel and leisure REIT)*
Choice Properties REIT (retail REIT)
Chorus Aviation (Industrials)
Cross Timbers Royalty Trust (Energy)
Dream Industrial REIT (industrial REIT)
Dream Office REIT (office REIT)
Dynex Capital (mortgage REIT)
Ellington Financial (mortgage REIT)
Eagle Point Income Company (Closed-End Funds)
EPR Properties (specialty REIT)*
Enerplus (Energy) – acquired by Chord Energy in 2024, no longer listed
Solar Senior Capital (Business Development Companies) – merged into SLR Investment in 2022, no longer listed
Stag Industrial (industrial REIT)
Superior Plus (Utilities)
Transalta Renewables (Utilities) – acquired by TransAlta in 2023, no longer listed
U.S. Global Investors (Finance)
Vermilion Energy (Energy)
Whitestone REIT (retail REIT)
Note: *Companies that suspended their dividend during the Covid-19 crisis.
Key Criteria for Choosing the Best Stocks on the List
When you invest in a monthly dividend stock, remember that these stocks are generally riskier than the market average, for the reasons given in the previous sections. To help you make the best possible choice, here are a few key criteria to follow.
A Track Record of Consecutive Years of Dividend Increases
The first key criterion to analyze is the strength of the dividend. Let’s be frank: it is the main pillar of this category of stock. If it were to shatter into a thousand pieces, you might as well look for greener pastures elsewhere.
First, make sure the company has a track record of consecutive years of dividend increases. Why? Because it is a sign of confidence in the company’s long-term future.
Second, make sure the payout ratio, one of the most widely used metrics for analyzing dividend safety, has not been high over several years, meaning it stays below 80%. By lingering in the red zone, the company is exposed to a stressful or external event that could force it to cut or suspend its dividend.
However, for REITs, which make up most monthly dividend stocks, you should look at the FFO payout ratio, which should be below 80–90% given how capital-intensive the sector is.
Debt Levels, a Concern to Watch Closely
When a company can no longer pay you a dividend, it is usually because of excessive debt. For a monthly dividend stock, this is even more damaging because it has less room to maneuver. These companies need capital in the form of cheap debt to grow.
To make sure the dividend is sustainable, you must keep a close eye on criteria such as:
Debt/EBITDA, which measures how long it would take the company to repay its debt. The limit not to exceed is 5, but for highly capital-intensive companies we can tolerate a limit of around 6–7.
The credit rating, which is the rating of a company’s debt set by the rating agencies (S&P, Moody’s, Fitch). As at school, the higher the grade, the easier it is to borrow. On the financial markets, an investment-grade credit rating, meaning BBB- or above, is considered acceptable. If, unfortunately, the credit rating is very low, the company’s cost of debt will rise and it will struggle to finance its business.
Cash Flow Is King
Generating revenue and profits is essential for a company. But does it do so while preserving or increasing its cash flow? Cash flow is the company’s direct means of paying dividends to its shareholders.
What should you look at carefully? First, analyze the company’s operating cash flow over the last five years. It absolutely must be positive, otherwise the company risks burning through its cash. It should also be stable or growing every year. Second, check that free cash flow is positive.
If you own a monthly dividend stock with fragile cash flow, you might as well sell it and find something better elsewhere.
Monthly Dividend Stocks – The Top 5
Gladstone Land Corporation
LTC Properties
Shaw Communications
Stag Industrial
Realty Income
You are no doubt eager to discover the top 5 monthly dividend stocks. They were selected based on their financial performance over the last five years, growth prospects, dividend safety and the quality of their business model.
1. Gladstone Land Corporation
REITs are not just office buildings, shopping centers, hotels or warehouses. You can find properties off the beaten track. In the monthly dividend stock family, have you heard of Gladstone Land Corporation?
Gladstone Land Corporation is a REIT that invests in and owns farmland in around ten US states, where fruit and vegetables are grown, as well as agricultural commodities such as wheat, soybeans, corn, sugar and rice. The company’s market capitalization has tripled since its March 2020 low following the Covid-19 crisis.
Gladstone Land buys farmland and then leases it to farmers through sale-leaseback agreements. The leases are generally triple net leases, meaning tenants pay all the costs (property taxes, maintenance, insurance) on top of the rent.
Its properties are mainly devoted to fruit and vegetables, for which demand is not very sensitive to the ups and downs of the economic cycle. By contrast, agricultural commodities generate lower returns because of their price volatility on the financial markets.
On the financial side, Gladstone Land’s cash flow grows every year, allowing it to pay regular dividends to shareholders. Its FFO payout is 83%, so there is nothing to worry about regarding the dividend in the short to medium term. The only drawback is its debt level, with a debt/EBITDA ratio above 15. On the other hand, the company’s underlying fundamentals are solid.
Gladstone Land has future growth drivers. First, food needs are supported by the growing world population. Second, the supply of farmland in the United States is shrinking despite the low population density. Farmland keeps being converted into apartment buildings, houses, shopping centers, office buildings and so on, a result of society’s excessive urbanization.
The combination of world population growth and the shrinking supply of farmland gives reason for some optimism about Gladstone Land’s future growth. The supply/demand balance will favor investment in farmland. With global warming a major challenge in the coming decades, this trend is only getting stronger. In addition to the dividend, Gladstone Land Corporation is a LONG CALL bet on inflation and, to a lesser extent, on rising agricultural prices.
2. LTC Properties
Did you know you can invest in the healthcare sector through REITs? Among property types, healthcare REITs are the most resilient in times of crisis, even though the Covid-19 crisis tarnished their reputation somewhat.
If you are interested, why not take a look at LTC Properties, the only healthcare REIT to pay a dividend on a monthly basis.
LTC Properties is a REIT that owns and manages around 180 skilled nursing facilities and assisted living communities for seniors. Its real estate portfolio is balanced between the two types of facility, spread across 27 US states and 30 operators.
The leases are triple net leases, which helps it manage costs and reduces operator risk. In addition, LTC Properties is both a property owner and a developer.
On the financial side, LTC Properties’ dividend has crossed the red line with an FFO payout ratio of 89%. Its average yield is between 5% and 6%. Nevertheless, you need to take the Covid-19 crisis into account, even though LTC Properties did not cut its dividend.
If you look at the bigger picture, there is no need to be too alarmist. On the one hand, its cash flow is relatively stable. On the other, its debt ratios are respectable for a capital-hungry industry: debt/EBITDA of 5.6 and debt-to-equity of 86%.
LTC Properties has an undeniable growth driver over the coming decades: the aging population. The Baby Boomers, who make up most of the population in Western countries, will see their healthcare needs rise. There will therefore be strong demand for nursing care and assisted living housing, which benefits LTC Properties. Since this demand will be driven by a large cohort of people over 80, it reduces the risk of tenant default and vacancies.
3. Shaw Communications
Shaw Communications had the distinction of being listed in both Canada and the United States. Let’s be frank: it was a rare gem for any dividend investor. Please note: since its acquisition by Rogers Communications, completed in April 2023, Shaw stock is no longer listed. We are keeping its profile as an example of analysis.
In the world of telecom operators, you are used to thinking of AT&T and Verizon in the United States and BCE and Telus in Canada, which pay quarterly dividends. But with the monthly dividend offered by Shaw Communications, you speed up your income generation.
Shaw Communications is a Canadian telecom operator. Its business revolves around two activities: wireless and wireline telecommunications. The Canadian company offers its customers (individuals and businesses) mobile phone services, fiber-optic Internet, satellite video subscriptions and more. Revenue is earned mainly in Canada and comes from consumer services.
Shaw Communications went through difficulties in the second half of the 2010s, due to the transformation of its business. The Canadian company wanted to refocus on its core business, telecoms, and divest from media, which it considered non-strategic. In March 2021, Rogers announced its acquisition of Shaw Communications; after lengthy reviews by competition authorities, the deal was completed on April 3, 2023, and Shaw stock was delisted.
Logically, its earnings were volatile, even though its subscriber base grew. Should you be worried about its dividend?
At first sight, no. The payout ratio is admittedly slightly above the red line at 81%. On the other hand, Shaw Communications managed to restore its cash flow and kept its debt under control, with debt/EBITDA of 2.82. This also earned it an investment-grade rating from Standard & Poor’s, giving it easier access to financing on the financial markets.
Although the Canadian telecom market is highly competitive, there is room to gain market share. It is also a sector that holds up well during recessions.
The rollout of 5G could benefit Shaw Communications. With a dividend yielding around 3%, it was an attractive monthly dividend stock to hold as a core portfolio position. However, since the acquisition by Rogers was completed on April 3, 2023, the stock is no longer listed: you can no longer buy it on the stock market.
4. Stag Industrial
E-commerce is a long-term trend that will continue for decades to come. Little by little, it is taking market share from physical retail. Instead of betting on pure players such as Amazon, Walmart, eBay, Alibaba, JD.com, or the carriers FedEx and UPS, take a look at Stag Industrial, which earns part of its revenue from tenants operating in e-commerce.
Stag Industrial is an industrial REIT focused on acquiring and leasing industrial properties across 39 US states. Its real estate portfolio consists mainly of warehouses, with the remainder dedicated to light manufacturing.
Its tenant base is relatively diversified by sector. Its top tenants include Amazon, FedEx, Costco Wholesale and DHL in e-commerce, Ford in automotive, Perrigo Company in healthcare, and Schneider Electric and XPO Logistics in industrials, among others. This reduces the risk of tenant default.
When you invest in a REIT, it is above all to receive regular dividends. Stag Industrial’s dividend did fall in 2019 after 7 consecutive years of increases. This was due to heavy property acquisitions, which reduced its cash flow in the short term. On the other hand, these investments create value for shareholders over the long term.
In 2020, the US company resumed its forward march despite the Covid-19 crisis. It even raised its dividend by one cent in 2020, albeit symbolically.
Its debt/EBITDA of 5.2 and FFO payout ratio of 72.8% give no cause for concern about the current safety of its dividend. Its share price is also at all-time highs and is outperforming the REIT sector average over the medium to long term.
Stag Industrial offers a yield of around 4% and a monthly dividend. The REIT is somewhat overvalued, as its P/FFO (the real estate equivalent of the P/E ratio) is 18.5, or 13% above the average REIT P/FFO. However, this does not call the quality of the company into question. It is better to wait for a pullback to buy it at a reasonable price.
The fact that Stag Industrial’s property portfolio is less exposed to the ups and downs of the economic cycle is an invaluable asset for investors looking for a yield that is both high and solid. In addition, growing online sales will drive increased demand for warehouses. It is a safe bet that big e-commerce names will optimize part of their operating costs by leasing warehouses from Stag Industrial.
5. Realty Income
This is the monthly dividend stock everyone would like to own. Since 2020, it has been part of the exclusive club of Dividend Aristocrats, the US companies that have raised their dividend for at least 25 consecutive years. In fact, it is the only monthly dividend stock with this distinction. You can see why investors are interested.
Realty Income is a REIT focused on retail properties, which make up 84% of its real estate portfolio. The remainder is split between industrial (11.5%), office (3%) and agriculture (1.5%). Geographically, its portfolio is heavily concentrated in the United States, across 49 states, as well as Puerto Rico and the United Kingdom.
Its top 20 tenants, which account for 51% of its rent, include heavyweights such as Walgreens, 7-Eleven, Dollar General, FedEx, Dollar Tree, Sainsbury’s, Walmart, CVS Pharmacy, Tesco, Home Depot and Kroger. Its leases are triple net leases, aimed at reducing part of its operating costs and giving it room to make acquisitions such as Vereit.
This diversification of its tenant base and property portfolio shows why Realty Income consistently grows its FFO and cash flow, and has paid a growing dividend for at least 25 years.
Although its FFO payout ratio is high at 83.4%, Realty Income keeps tight control of its financial management to retain its Dividend Aristocrat status. Its debt ratios are not the kind that worry the rating agencies, which give it an investment-grade rating.
In any case, Realty Income is the cream of the crop among monthly dividend stocks thanks to its exceptional dividend growth track record. You can make it one of the pillars of your portfolio, with the right balance between yield, recurring income and steady capital growth.
When to Buy to Receive Monthly Dividends?
Since these companies pay a dividend every month, the question of when to buy them should not become an obsession. The only thing to watch is the calendar of ex-dividend dates.
If you want to receive the dividend, buy the stock before the ex-dividend date. However, it is wise to do so under market conditions that suit you, meaning at reasonable prices or when the chart shows a bullish technical setup.
How to Buy Dividend Stocks
Open an account with a regulated online broker
Fill in the registration form
Make your first deposit
Buy the stocks you want
Collect your dividends every year!
Conclusion
Monthly dividend stocks offer various advantages that investors find hard to ignore. First, you collect income every month. Having extra income to cover your personal expenses is always welcome. Second, they offer yields above the market average and inflation, which partly offsets the loss of value of money each year.
However, investing in monthly dividend stocks is not a safety net. They are riskier than core portfolio stocks such as Johnson & Johnson, Air Liquide, Coca-Cola and PepsiCo. Expect sudden dividend cuts or suspensions at the slightest sign of trouble. Hence the importance of being selective. Why not keep a close eye on the top 5 monthly dividend stocks?
If we were in your shoes, we would allocate a small percentage of your portfolio to them, with a preference for REITs, which seem more familiar to individual investors.
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